A sudden unwind in global precious metals markets has spilled over into Indian exchange traded funds, with silver ETFs falling as much as 8 percent in early trade on February 6 after international spot prices dropped below the psychologically important $70 per ounce mark on Comex.

The correction comes barely days after silver and gold recorded record-breaking gains in January, underscoring how quickly leveraged positioning can reverse when market structure changes.

On the Multi Commodity Exchange, silver futures for March delivery dropped around 6 percent to trade near ₹2.29 lakh per kilogram in early trade. This marks a dramatic reversal from last week’s lifetime high of ₹4.2 lakh per kilogram. The May contract also fell close to 4 percent to ₹2.42 lakh per kilogram. Gold futures on MCX were also trading lower.

The impact was immediately visible in Indian ETFs tracking the metal.

Edelweiss Mutual Fund’s silver ETF declined more than 8 percent in early trade.

Similar declines of 7–8 percent were seen across products from Aditya Birla Sun Life Mutual Fund, SBI Mutual Fund, HDFC Mutual Fund, UTI Mutual Fund, Tata Mutual Fund, ICICI Prudential Mutual Fund, and Nippon India Mutual Fund. Gold ETFs were relatively resilient but still fell 2–3 percent across funds from Motilal Oswal, ICICI Prudential, DSP and UTI.

The trigger for the fall did not originate in India. It began with a structural change in the derivatives market in the US.

The CME Group increased margin requirements for gold and silver futures, forcing leveraged traders to either add fresh collateral or liquidate positions. In crowded commodity trades, such moves often cause forced unwinding rather than orderly profit booking.

The second trigger came from US policy expectations. US President Donald Trump nominated Kevin Warsh as the next Federal Reserve Chair. Warsh is widely viewed as a policy hawk and dollar-supportive candidate. That immediately lifted the US dollar and altered rate-cut expectations, both of which are typically negative for precious metals.

As the dollar strengthened, gold and silver lost a key support pillar that had driven their strong rally through 2025.

This explains why the fall is being described by analysts not as a demand collapse, but as a positioning-led correction.

According to commodity analysts, silver had rallied 50–60 percent year-to-date on a mix of industrial demand optimism, global supply deficits, and safe-haven buying amid geopolitical tensions. Such extended rallies often leave the market vulnerable to sharp corrections when leverage gets squeezed.

Yet, the underlying fundamentals for silver have not changed overnight.

Industrial demand for silver, especially from electronics, solar manufacturing, and high-end manufacturing, remains firm. Global mine supply has not kept pace with consumption for several quarters. This creates a structural deficit that tends to reassert itself after speculative excesses unwind.

Analysts tracking the metal argue that intraday or even weekly collapses in price driven by margin calls do not necessarily alter medium-term supply-demand dynamics.

Gold, meanwhile, continues to derive support from inflation concerns, currency instability across regions, and geopolitical risks. Even if safe-haven flows cool temporarily due to easing trade tensions or improved risk sentiment, central bank buying and strategic allocation demand remain intact.

Another dimension influencing metals is the evolving India–US trade engagement narrative. Improved trade flows and easing tariff pressures can lift risk appetite and reduce fear-driven buying of precious metals. However, stronger trade also supports manufacturing demand, which indirectly benefits silver due to its industrial usage.

For Indian investors, the sharp fall in ETFs highlights how global derivative market actions can rapidly transmit into domestic passive investment products. ETFs, by structure, mirror spot and futures prices without the cushioning that diversified portfolios may provide.