Gold and silver exchange-traded funds are under pressure again as June’s correction deepens, with Indian investors pulling record amounts from precious-metals funds in May after months of strong gains. The selloff follows weaker bullion prices, rising U.S. rate-hike bets, and a shift in sentiment away from safe-haven assets as geopolitical tensions eased.
Precious metals ETFs slide as bullion weakens
Gold and silver ETFs fell sharply in early June, tracking a broader decline in global bullion prices. On June 8, several silver ETFs dropped more than 6 percent while gold ETFs slipped about 2 to 3 percent, mirroring weakness in spot metals and futures markets. The decline was driven by a stronger U.S. dollar, firmer Treasury yields, and expectations that the Federal Reserve may keep rates elevated for longer than previously hoped.
The pressure was visible across the Indian ETF market, where silver funds were hit harder than gold products. Funds such as Nippon India Silver ETF, SBI Silver ETF and ICICI Prudential Silver ETF all posted losses of around 6.5 percent to 6.7 percent in the June 8 session, while mainstream gold ETFs also traded lower.
Record outflows hit gold and silver funds
Investor sentiment turned notably more cautious in May, when combined outflows from gold and silver ETFs reached nearly ₹3,000 crore, according to market reports. Business Standard reported that this was the highest-ever combined monthly withdrawal from the two categories, while Moneycontrol said gold ETFs saw their first monthly outflow in a year and silver funds recorded a fourth straight month of redemptions. Reuters also reported that May redemptions from gold ETFs alone reached record levels, showing how sharply retail and institutional appetite had shifted after the earlier rally.
The reversal is striking because precious-metals funds had attracted significant inflows earlier in the year, when investors were seeking protection from inflation, war risk, and market volatility. But once prices surged to record or multi-month highs, profit booking accelerated, and the correction drew money out of the asset class. Analysts said the move reflected a classic shift from fear-driven buying to gain preservation.
Why investors are pulling back
The immediate trigger for the selloff has been a mix of macro and market factors. Strong U.S. economic data increased bets on higher interest rates, which tends to weigh on non-yielding assets such as gold and silver. At the same time, easing geopolitical tensions, including optimism around developments in the Middle East, reduced some of the safe-haven demand that had supported the rally.
Market watchers also point to valuation fatigue. Gold and silver had already posted strong gains in the months before the correction, and the latest decline appears to have prompted widespread profit-taking. In some cases, investors who entered late in the rally are now booking exits after seeing recent highs evaporate.
Silver ETFs see sharper losses
Silver ETFs have been hit more severely than gold because silver tends to be more volatile and is more exposed to industrial sentiment. In early June, several silver ETFs fell by more than 6 percent in a single session, while gold funds generally declined by a smaller margin. That pattern follows earlier episodes this year when silver funds saw steeper corrections than gold after rapid rallies.
The weakness has also been reflected in physical markets. Domestic silver prices and MCX futures dropped sharply as traders recalibrated rate expectations and locked in gains. As a result, silver-focused funds have become the most visible casualty of the broader precious-metals pullback.
What the outflows mean for market sentiment
The latest numbers suggest that investors are becoming less convinced that precious metals will continue their near-term climb. Although gold remains a popular hedge over the long term, the scale of recent redemptions shows that many holders are willing to rotate out when prices become stretched. That is especially true in India, where retail investors have become more active in ETFs and are quick to respond to price swings.
Still, analysts caution against reading the selloff as a structural exit from gold and silver. Reuters noted that gold ETFs remain in positive territory for the year despite May’s outflows, suggesting the correction is more about timing and profit-taking than a wholesale abandonment of the asset class. Some strategists say the pullback may actually reset valuations and attract fresh interest later if volatility returns.
Geopolitics, rates and the next move
The direction of precious-metals ETFs will likely depend on the next move in U.S. monetary policy and the broader geopolitical backdrop. If rate expectations rise further, gold and silver could remain under pressure; if inflation cools or risk aversion returns, bullion may regain its safe-haven appeal. In the near term, however, the market appears to be digesting the sharp run-up seen earlier this year.
For investors, the message from May and early June is clear: the trade that looked like a defensive play can become a crowded one very quickly. Gold and silver ETFs are still important portfolio diversifiers, but their recent volatility has reminded markets that even safe havens can experience sharp reversals. As sentiment settles, the key question is whether the current correction is a pause in the rally or the start of a longer cooling-off phase.
