Gold and Silver ETFs Plunge Amid Rising Oil Prices, Interest Rate Hikes

The gold and silver exchange-traded funds (ETFs) in India came under pressure on September 28, with silver ETFs falling by around 3.5%, 4%. The decline was attributed to a combination of rising crude oil prices, inflation concerns, and growing expectations of further US Federal Reserve interest-rate hikes.

Rising crude oil prices have increased transportation, manufacturing, and other operating costs, adding to global economic inflationary pressures. This has implications for precious metals as persistent inflation could prompt central banks to maintain or increase interest rates, making non-yielding assets like gold and silver less attractive.

The Fed's decision to raise its target interest-rate range by 25 basis points earlier this month to 3.75%, 4% has also contributed to the pressure on precious metals. Higher interest rates generally weigh on gold and silver because these assets do not offer interest income, making investors opt for interest-bearing assets.

The near-term direction of gold and silver ETFs will depend on how global economic and geopolitical developments unfold. Investors will closely monitor inflation data, economic indicators, and statements from Fed officials for clues about the direction of interest rates.