Gold ETFs Decline Amid Weakening Global Market Sentiment

Gold ETFs Slide Amidst Broader Market Volatility

On May 4, gold exchange-traded funds (ETFs) traded in the red, reflecting a decline in prices across the sector. This dip in gold-linked assets was mirrored by a decrease in gold futures on the Multi-Commodity Exchange (MCX).

The HSBC Gold ETF fell by approximately 1.79 percent, while the Invesco India Gold ETF declined by 1.42 percent. Axis Gold ETF dropped around 1.24 percent, and Nippon India ETF Gold BeES declined by 0.83 percent. ICICI Prudential Gold ETF also dropped close to 1.06 percent, even as trading volumes in these funds remained strong.

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The weakness in gold ETFs was attributed to the firm dollar and elevated crude oil prices. The dollar's strength, coupled with the high demand for it due to elevated crude oil prices, typically puts pressure on gold prices.

The ongoing Iran war has kept markets on edge, with US President Donald Trump indicating that Iran's peace proposal may not be enough, adding to uncertainty over the peace effort. This has maintained pressure on oil-importing economies like India, with Brent crude hovering near $108 a barrel.

However, there are signs of hope, with the US indicating it may help guide neutral ships through the Strait of Hormuz, which could ease supply concerns slightly. This has left markets stuck between fear and hope, with currencies reflecting this confusion.

Gold prices have experienced a strong rally over the past few years, and experts believe that this is a phase of consolidation. Equity market performance should not be used as a direct indicator for gold, as both behave differently.

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The equity benchmarks Sensex and the Nifty ended around 0.5 percent higher at 77,269 and 24,119, respectively.

Investors are advised to avoid chasing short-term moves and instead focus on staggered buying during dips to manage volatility. This phase can be used to gradually accumulate gold, with a time horizon of around two to three years.

The dollar's current position is at a make-or-break support, and the cracks are starting to show. A deep divergence is building beneath the surface, and if the dollar slips, commodities could surge faster than expected.