Silver exchange-traded funds (ETFs) rose up to 6 per cent on Thursday, August 20, following a pullback in US 30-year Treasury yields.
Both Silver and Gold ETFs saw a sharp uptick after the US Treasury Department announced it would double the size of liquidity support buyback operations, pausing the surge in yields. The yield on 30-year US Treasuries fell to 5.18 per cent after it touched 5.3 per cent on Tuesday.
Tata Silver ETF, Nippon Silver ETF, HDFC Silver ETF, SBI Silver ETF, Axis Silver ETF, DSP Silver ETF, Groww Silver ETF all gained over 4 per cent each
Meanwhile, Mirae Asset Silver ETF, ICICI Prudential Silver ETF, Aditya Birla Sun Life Silver ETF, Edelweiss Silver ETF and Motilal Oswal Silver ETF all gained over 3 per cent on Thursday.
In Gold as well, 360 ONE Gold ETF, DSP Gold ETF, Kotak Gold ETF, Axis Gold ETF, The Wealth Company Gold ETF, ICICI Prudential Gold ETF, Tata Gold ETF, Choice Gold ETF and UTI Gold ETF were up in the range of 2-2.5 per cent.
At the last check on MCX, Silver Sep 4 Futures were trading at ₹2,39,841 per kg, up over 1.2 per cent. Gold Futures also gained 0.30 per cent to ₹1,58,475 per 10 grams.
In a month, Silver ETFs recorded 7.5 to 8 per cent upside, and Gold ETFs have delivered a return of 9.5 to 10 per cent.
Key reasons behind ETF rally
Ajit Mishra, SVP Research at Religare Broking, said ETF prices have gained as the Fed in its recent FOMC minutes, maintained a stable yet hawkish stance. He also noted that cooling bond yields have further supported the current rise in ETFs.
Meanwhile, Nirpendra Yadav, senior research analyst at Bonanza, said that Silver ETFs are seeing a sharp move as silver prices have rebounded strongly in global and domestic markets. The move is primarily a combination of a weaker US dollar, lower US Treasury yields, renewed precious-metal buying and silver’s higher beta versus gold.
“A decline in US bond yields reduces the opportunity cost of holding non-yielding precious metals. This has supported both gold and silver,” Yadav said.
He also added that a softer dollar makes dollar-denominated commodities such as silver cheaper for non-US investors, supporting international demand. The dollar weakness has been an important driver of the current precious-metals rebound.
On Silver ETFs surging more than Gold ETFs, Yadav said, silver is outperforming gold because of its higher volatility. Silver behaves partly like a precious metal and partly like an industrial commodity. When bullion sentiment turns positive, silver generally has a higher beta to gold, “so a 1 per cent move in gold can produce a substantially larger percentage move in silver.”
He also noted that Silver ETFs can temporarily trade at a premium to their NAV, depending on demand, liquidity and the availability/pricing of physical silver. “We have seen this phenomenon before, when Indian silver ETFs moved substantially more than global/MCX silver.”
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