Silver ETFs fall over 3% as global silver extends losses on rising Fed rate hike bets; gold ETFs also down

New business data points to the fact that Silver exchange-traded funds (ETFs) declined more than 3 percent on Friday, September 11, as the precious metal remained under pressure in international markets following a sharp sell-off in the previous session. Gold ETFs additionally traded softer, though their declines were much smaller.

The SBI Silver ETF was down 3.2 percent at Rs 221.77, while ICICI Prudential Silver ETF declined 3.1 percent to Rs 226.16. Nippon India Silver ETF declined 3.1 percent to Rs 216.59, and Tata Silver ETF was down 3.1 percent at Rs 21.98.

The declines came as silver extended Thursday's steep decline in international markets. Silver eased 0.3 percent to $63.40 an ounce on Friday after tumbling 5.5 percent in the previous session, its biggest one-day decline since June.

The softness in precious metals comes amid a sharp repricing of US interest-rate expectations, with stronger-than-anticipated producer inflation, surging crude prices and rising Treasury yields adding to concerns that the The US central bank could raise interest rates at its policy meeting the week ahead.

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US producer prices rose 0.4 percent in August, following an upwardly revised 0.1 percent gain in July. Traders subsequently boosted their expectations of a Fed interest-rate gain, with the probability of an gain of at least 25 basis points the week ahead rising to around 70 percent from around 64 percent before the data, according to Reuters.

Elevated interest rates and bond yields typically pose a headwind to precious metals, which do not offer interest income. The dollar has additionally strengthened, adding pressure on dollar-denominated gold and silver.

Oil's surge has complicated the outlook further. Brent crude jumped 6 percent to around $107 a barrel amid disruptions to supply routes through the Strait of Hormuz and the Red Sea as the conflict involving the US, Israel and Iran continued. The climb in energy prices has intensified inflation concerns and, in turn, expectations that the Fed may need to tighten monetary policy.

Domestic silver prices have additionally come under pressure. Silver December futures were trading around Rs 2.31 lakh per kg, down around 1.4 percent on the day and more than 4 percent during the past week.

Gold ETFs were comparatively resilient on Friday. SBI Gold ETF was down 1.1 percent at Rs 128.84, ICICI Prudential Gold ETF declined 1 percent to Rs 129.42, Nippon India ETF Gold BeES declined 1 percent to Rs 124.93, and Tata Gold ETF was down 0.9 percent at Rs 14.69.

In international markets, spot gold was little changed around $4,312 an ounce after falling nearly 2 percent on Thursday. The metal was headed for a weekly slide of around 2.7 percent and a third consecutive weekly loss as rising yields and expectations of elevated US interest rates outweighed its traditional safe-haven appeal amid heightened geopolitical tensions.

The softness in precious-metal ETFs came alongside a broader sell-off in Indian equities. The Sensex was down 543 points, or 0.7 percent, at 74,359 around 10:42 am, while the Nifty declined 185 points, or 0.8 percent, to 23,293. Market breadth was firmly negative, with more than twice as many stocks declining as advancing.