Gold and Silver Prices Slide Sharply; Precious-Metal Funds Track Weaker Underlying Markets

Key Takeaways:

• Gold futures fell to around $4,230 an ounce in international trade on September 28, while silver moved below $62.50. 
• MCX gold opened ₹751 lower at ₹1,50,100 per 10 grams. 
• Gold and silver ETFs and FoFs derive their returns primarily from movements in the underlying metals, making the latest bullion decline relevant for precious-metal fund investors. 

Gold and silver began the week under pressure on September 28, extending a period of weakness in precious metals and directly affecting the underlying assets tracked by gold ETFs and silver ETFs and fund-of-funds products. 

International gold futures fell towards $4,230 per ounce during the session and touched a seven-week low, according to Business Standard. Silver moved below $62.50 an ounce. 

The decline was also visible in domestic futures. 

The benchmark October gold contract on the Multi Commodity Exchange opened ₹751 lower at ₹1,50,100 per 10 grams. 

Comex gold had previously closed at $4,321.20 an ounce and traded around $4,224.60 at the time of Business Standard's report, down $96.60. Silver was around $62.40 an ounce after a previous close of $64.80. 

Elevated crude prices, concerns around inflation, higher interest-rate expectations and a stronger dollar have combined to put pressure on non-yielding precious metals. 

For mutual fund investors, bullion moves matter because gold and silver ETFs are designed to broadly reflect changes in the value of their respective underlying metals, after expenses and tracking differences. 

Fund of funds investing in those ETFs are exposed indirectly through the underlying scheme. 

The movement therefore differs from an equity mutual fund, where returns are determined by the performance of a portfolio of companies. In a gold ETF, the metal price itself is the central performance driver. 

Precious metals had recorded substantial price gains earlier in the year. The latest decline has reversed part of those gains. 

Gold and silver can still behave differently from each other because silver has a larger industrial demand component, while gold demand is more heavily influenced by monetary conditions, investment demand and central-bank activity. 

For existing gold and silver fund investors, September 28's fall represents a movement in the asset being tracked rather than a change in the structure of the mutual fund schemes themselves.