Gold and silver exchange traded funds saw a strong recovery in morning trade on February 4, tracking a sharp rebound in underlying futures on the Multi Commodity Exchange. The bounce comes after a steep correction that erased a significant portion of the record rally seen in January.

Gold futures for April expiry jumped more than 4.5 percent to ₹1,60,755 per 10 grams, while June and August contracts gained nearly 5 percent each. Silver futures for March expiry surged 6 percent to ₹2,84,094 per kilogram, with later contracts also posting strong gains.

ETF prices mirrored this move. Silver ETFs such as Tata Silver ETF and Kotak Silver ETF rose between 8–9 percent, while several other silver ETFs gained over 7 percent in early trade. Gold ETFs also advanced, with The Wealth Company Gold ETF rising around 7 percent and many peers gaining 4–6 percent.

Yet, despite the rebound, both metals and their ETFs remain below the lifetime highs touched in late January, underlining that this is a recovery from a technical shock rather than a continuation of the earlier euphoric rally.

The correction that preceded this bounce was triggered by a dramatic unwind in leveraged positions. The CME Group had raised margin requirements on gold and silver contracts, forcing traders with high leverage to liquidate positions. This margin-led selling coincided with renewed dollar strength after reports that US President Donald Trump is set to nominate Kevin Warsh as the next Federal Reserve Chair, a move interpreted by markets as dollar supportive and potentially hawkish for interest rates.

The combination of forced liquidation, thin liquidity, and extremely overbought conditions led to what analysts describe as panic selling. Silver had risen more than 60 percent in a month, while gold had climbed over 20 percent in a short span before the correction. Profit booking rapidly turned into disorderly selling.

Analysts now view the rebound as a technical recovery supported by stabilising sentiment and expectations that the Federal Reserve may still deliver at least two rate cuts this year. According to commodity analysts, gold has pulled back from key Fibonacci retracement levels and faces resistance zones ahead, while silver has regained critical support levels that may enable further upside if momentum sustains.

Market participants, however, are increasingly distinguishing between structural drivers and short term volatility. Long term factors such as central bank gold buying, geopolitical tensions, and macro uncertainty remain intact. What changed in the past week was positioning, not fundamentals.

For Indian investors, the move has two visible implications.

First, ETF flows are once again tracking global price movements with high sensitivity. Retail and HNI investors who use gold and silver ETFs as portfolio hedges are seeing heightened volatility, reflecting how global derivative market actions can quickly transmit to domestic ETF pricing.

Second, the episode reinforces how margin policies and currency movements can dominate short term price behaviour in commodities, even when long term narratives remain supportive.