After one of the strongest rallies seen in decades, gold and silver exchange-traded funds (ETFs) suffered a sharp jolt on Thursday, raising a familiar question for investors: Is this a buying opportunity, or a warning sign that the rally has gone too far?
Several precious metal ETFs witnessed steep single-day declines as geopolitical tensions eased and investors rushed to book profits. The sell-off followed a record run in gold and silver prices that had been fuelled by tariff threats, military rhetoric and a global risk-off mood. As those fears softened, so did the appetite for safe-haven assets.
The correction was swift and deep. Tata Silver ETF plunged as much as 21 per cent to its intraday low, while Birla Sun Life Gold ETF fell 12 per cent before recovering part of the losses by the end of the session, reported Moneycontrol.
The declines mirrored the pullback in underlying spot prices of gold and silver, which had climbed to record levels only days earlier.
Market participants said the scale of the fall reflected how crowded the trade in precious metals had become after months of uninterrupted gains. With prices stretched and positioning heavy, even a small shift in sentiment triggered an outsized reaction.
What Triggered the Sudden Reversal?
The immediate catalyst came from easing geopolitical risks. US President Donald Trump said he had reached the outlines of a deal with NATO on the future of Greenland and would not impose the tariffs that were scheduled to take effect on February 1.
“Based upon this understanding, I will not be imposing the tariffs that were scheduled to go into effect on February 1st,” Trump wrote on Truth Social after meeting NATO Secretary General Mark Rutte in Davos.
He also ruled out the use of military force to seize Greenland. “I won’t do that,” Trump said. “Okay? Now everyone’s saying ‘oh, good’ that’s probably the biggest statement I made because people thought I would use force. I don’t have to use force, I don’t want to use force, I won’t use force.”
These remarks reversed a key driver of the earlier rally. Gold and silver had surged after Trump had previously threatened military action and tariffs, triggering tensions between the US and the European Union and pushing investors into safe-haven assets.
Have Gold Prices Already Run Too Far?
Some analysts argue that the correction was overdue. Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, pointed out that gold had already achieved the technical targets outlined months ago.
“In September 2025, we recommended gold at around $3,540 with a target of $4,750, which has now been successfully achieved, validating the underlying technical structure and long-term trend strength,” Sheth said.
According to him, the rally was driven by persistent geopolitical uncertainty, structurally higher fiscal deficits, resilient central bank demand and a supportive real interest rate environment.
“Looking ahead, while interim consolidations are natural after a strong run-up, the broader setup suggests gold remains well-positioned over the coming years,” Sheth said. Based on Fibonacci extension analysis, he sees the next major target zone near $7,040, adding that gold should continue to behave as a long-term portfolio anchor rather than a short-term trading instrument.
Why the Trend Still Favour Metals
Analysts said the latest dip reflects healthy profit-booking after a sharp run-up, rather than a breakdown in the broader uptrend. Open interest data in the futures market showed a decline in outstanding positions, with OI currently at 9,870 lots even as prices showed upward momentum.
According to Aamir Makda, Commodity and Currency Analyst at Choice Broking, this pattern points to long unwinding by traders rather than the creation of fresh short positions, indicating that the sell-off has been driven by profit-taking, not a reversal in sentiment.
Meanwhile, COMEX silver continued to trade firm in the $92–$93 range after recently touching record highs above $95.80, suggesting that international prices remain well supported despite the ETF-led correction in domestic markets.
Analysts said the longer-term rally continues to be powered by robust industrial demand across sectors such as solar power, electric vehicles, artificial intelligence, electronics, and by steady safe-haven flows amid tightening global supply conditions.
Dollar, Tariffs and Global Politics Add to Volatility
Currency moves have also played a role. The US dollar traded in a stable tone after President Donald Trump said tariffs would not be imposed on European countries over Greenland. The dollar index rose to 98.81, making gold marginally more expensive for overseas buyers and adding to near-term pressure on prices.
At the World Economic Forum in Davos, Trump reiterated that force would not be used to acquire the Arctic island and said he had “formed the framework of a future deal with respect to Greenland” with NATO Secretary General Mark Rutte. These remarks further eased geopolitical risk, prompting some investors to trim safe-haven exposure.
All Eyes on the Fed and US Inflation Data
Investors are now closely watching fresh macro cues from the US. Markets are awaiting November Personal Consumption Expenditures (PCE) data, the Federal Reserve’s preferred inflation gauge, along with weekly jobless claims, both due later in the day.
Most market participants expect the US Federal Reserve to keep interest rates unchanged at its January 27–28 meeting. However, two rate cuts are still widely anticipated later in the year, a factor that could revive support for gold and silver once near-term volatility settles.
