Silver ETFs Plummet Up to 8%, Hind Zinc Slumps 4.5% as Precious Metal Prices Decline by 6% to Rs 2.13 Lakh per Kg

Global Precious Metals Crash Amid Escalating Middle East Conflict

March 23, 2023 saw a significant decline in the prices of gold and silver futures contracts on the Multi Commodity Exchange (MCX). The MCX May silver contract fell by 6% to Rs 2.13 lakh per kg, while the COMEX May silver contract was trading 6% lower at $65.5 per ounce.

The decline in precious metals prices was attributed to escalating military hostilities in West Asia, which stoked inflation concerns and expectations of higher global interest rates. The Nippon India Silver ETF was trading 8% lower at Rs 202.2, while the Tata Silver Exchange Traded Fund was trading 7.65% lower.

Hindustan Zinc, the country's largest producer of silver, saw its shares trading 4.5% lower at Rs 491.3 apiece. The shares of Vedanta, the promoter of Hindustan Zinc, also fell by 4.5% due to the decline in global aluminium prices.

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Gold prices slipped by more than 2% on Monday, extending their drop to a roughly four-month low. Spot gold was down 2.5% at $4,372.86 per ounce, while U.S. gold futures for April delivery fell by 4.4% to $4,375.60.

The MCX shares were trading nearly 5% lower at Rs 2,296.6 apiece, while the Nifty Metal index was trading over 4% lower on March 23. The prices of precious metals also fell due to prospects of liquidity-driven sales amid the conflict in West Asia.

The escalating conflict in West Asia, particularly the closure of the Strait of Hormuz, has kept crude prices elevated, stoking inflation through higher transport and manufacturing costs. This has led to a shift in expectations from rate cuts to potential rate hikes, which has tarnished gold's appeal from a yield point of view.