Whalesbook
The USD's Dominance Over Geopolitics in ETFs
Precious metal ETFs in India faced significant selling pressure on Wednesday, March 3, 2026, erasing gains achieved just days prior. The sell-off saw prominent silver ETFs like HDFC Silver ETF plunge by 8.5%, with others such as UTI, Groww, Tata, Axis, and ICICI Prudential Silver ETFs declining over 7%. Gold ETFs were also under pressure, with Axis Mutual Fund Gold ETF, Union Gold ETF, and The Wealth Company Gold ETF each falling more than 4%. This broad retreat occurred as the U.S. Dollar Index (DXY) strengthened, reaching a 3.25-month high of 99.07 on March 3rd [26]. The dollar's ascent made dollar-denominated commodities like gold and silver more expensive for foreign buyers, exerting downward pressure on prices [3, 12].
Futures Market Defies ETF Weakness
In stark contrast to the ETF performance, gold and silver futures on India's Multi Commodity Exchange (MCX) demonstrated resilience. Gold futures for April delivery climbed 1.53% to ₹1,63,581 per 10 grams, while May silver futures advanced 3.08% to ₹2,73,500 per kilogram on the same day [Source A]. This divergence suggests that while the spot and ETF markets were heavily influenced by currency fluctuations, the futures market retained a speculative bullish bias, likely supported by underlying geopolitical tensions. Analysts noted that MCX gold prices were consolidating with a mild positive bias, with strong demand observed in the ₹1,58,000–₹1,62,000 range [Ponmudi R, CEO of Enrich Money].
The Geopolitical Backdrop and Macroeconomic Crosscurrents
The underlying driver for initial safe-haven demand was the escalating US-Israeli air war against Iran, which reportedly led to the death of Iran's Supreme Leader, Ayatollah Ali Khamenei [11, 15, 37]. This heightened geopolitical risk typically supports gold and silver prices. However, the immediate impact on spot markets was complex. International spot silver prices, after surging toward $96 per ounce on geopolitical fears, reversed sharply to trade around $84.88 by early March 3rd ET, a significant drop attributed to dollar strength and profit-taking [3, 13]. Spot gold also experienced a dramatic reversal, falling from over $5,400 an ounce to nearly $5,018 by Tuesday, March 3rd, pressured by the stronger dollar and increased expectations of higher interest rates due to oil price spikes [13]. Oil prices themselves saw substantial gains, with Brent crude up 1.49% and WTI crude rising 1.09% amidst fears of Strait of Hormuz disruption [15, 40].
Analyst Outlook: Bullish Gold, Volatile Silver
Despite the short-term ETF weakness, the broader outlook for gold remains positive. Analysts cite ongoing geopolitical tensions and robust fundamentals, forecasting gold's recovery [Hareesh V, Geojit Financial Services]. Several institutions project gold prices to reach new highs in 2026, with JPMorgan forecasting up to $6,300 per ounce by year-end [22], and Macquarie revising its 2026 average forecast to $4,323 [35]. Global gold ETFs saw significant inflows totaling $10.5 billion year-to-date in early March 2026, indicating sustained institutional interest [46].
Silver, however, is expected to experience more volatile trading. While the long-term bullish framework remains intact due to geopolitical factors, speculative transactions are anticipated to dominate, leading to choppy price action with only a mild positive bias [Hareesh V]. Analysts predict silver could reach triple digits in 2026, with aggressive forecasts reaching $135 [9], though its higher volatility means sharper pullbacks are also likely [17, 18]. In the last year, silver ETFs showed substantial returns of 175.38%, far exceeding gold ETFs' 83.39% [33], highlighting its greater price swings. Historically, silver has shown a strong correlation with gold, but its price action can be amplified due to its dual nature as a safe-haven and industrial metal [33].
The Bear Case: Currency Strength and Market Volatility
The primary risk factor currently is the sustained strength of the U.S. dollar, which poses a direct headwind for dollar-denominated precious metals. The dollar's rise above 99 on the DXY index suggests a potentially prolonged period of pressure on gold and silver prices in dollar terms, particularly for assets priced directly in USD [26, 27]. Furthermore, the escalating Middle East conflict introduces significant uncertainty, potentially leading to further oil price spikes, which could dampen global growth expectations and increase inflation concerns, leading central banks to maintain higher interest rates for longer [13, 40]. This environment increases the opportunity cost of holding non-yielding assets like gold and silver. While gold has historically served as an inflation hedge, its performance during high inflation periods has been mixed, with negative real returns in 13 of the last 28 years when inflation exceeded 3% [45]. The historical inverse relationship between the USD and precious metals, though sometimes disrupted by geopolitical events, reasserted itself forcefully on March 3rd [12, 31, 38].
Future Outlook
The immediate future for gold and silver prices will likely be shaped by the trajectory of the US dollar and the ongoing geopolitical situation in the Middle East. While institutional demand and safe-haven flows continue to support a bullish long-term outlook for gold, currency strength and potential rate stability could cap near-term upside. Silver is poised for continued volatility, with its dual industrial and safe-haven nature creating complex trading dynamics. Investors are advised to monitor currency movements and geopolitical developments closely, as these factors will dictate whether the recent sharp corrections in ETFs mark a temporary pause or signal a more sustained bearish trend, contrasting with the constructive outlook for MCX futures.