Whalesbook
Margin Removal Lifts Bullion ETFs
The immediate catalyst for precious metal ETFs' upward movement on Wednesday was the decisive action by India's Multi Commodity Exchange (MCX) and National Stock Exchange (NSE) to withdraw additional margin requirements. Effective February 19, the removal of these previous 3% and 7% extra margins on gold and silver futures, respectively, is anticipated to inject greater liquidity and encourage more active participation in the bullion markets. Silver ETFs saw gains of up to 4.2%, while gold ETFs edged up by approximately 0.30%. This rebound occurred despite the US dollar reaching a more than one-week high, a factor that typically dampens demand for dollar-denominated commodities by increasing their cost for international buyers.
On the MCX, gold futures for April 2 expiry traded near ₹1,56,130 per 10 grams, marking a 0.24% increase, while silver futures for April 30 expiry rose approximately 0.40% to around ₹2,48,550 per kg. MCX Silver Mini contracts also performed well, trading up 4.20%. In physical markets, 24K gold prices climbed about 0.29% to near ₹1,56,490 per 10 grams. Despite this recovery, gold remains in a consolidation phase, having corrected nearly 2.55% in February from record highs above ₹1,80,000 earlier in the year. Silver has experienced sharper fluctuations, with physical silver prices falling significantly from their February peak.
Underlying Strengths and Enduring Headwinds
While regulatory margin adjustments provide a short-term boost, the broader outlook for precious metals remains shaped by significant macroeconomic forces. Global gold ETFs have demonstrated robust growth, with total assets under management (AUM) reaching an estimated US$530 billion in February 2026, a 5% month-over-month increase, holding a record 3,932 tonnes [22]. In India, silver ETFs saw AUM cross ₹1.16 lakh crore in January 2026, a 61% monthly surge [45]. These instruments have attracted substantial investor interest, driven by a search for diversification and hedges against global uncertainties. Analysts forecast constructive performance for 2026, with some institutions revising gold price targets upwards, projecting ranges from $4,300-$5,000/oz to as high as $5,500-$6,300/oz [7]. Central bank accumulation of gold continues to be a structural factor, with global purchases in 2023 marking the highest total since 1950 as institutions diversify away from dollar-denominated assets [7].
The US dollar index, though showing recent strength around 97.7474, has weakened 8.11% over the past year and is down 15% from its mid-2022 peak [12, 19]. This downward trend in the dollar is generally supportive of gold and silver prices. However, the Federal Reserve's policy path remains a key uncertainty. Minutes from the January meeting revealed a division among policymakers, with some favoring further easing if disinflation continues, while others expressed caution regarding persistent inflation, suggesting rates could remain elevated or even be tightened [12, 38, 43]. Inflation itself, while showing moderation with core CPI at 2.5% in January 2026, remains sticky, particularly in core services ex-housing, which is expected to plateau near 3% throughout the year [15, 32].
The Bear Case: Volatility and Macro Skepticism
The recent sharp price swings in precious metals underscore their inherent volatility. Silver experienced its worst single-day sell-off on January 31, 2026, a 27% plunge after a massive 170% rally in 2025, and is currently down 42% from its record high [29]. Gold has also seen corrections, down nearly 20% from its peak [29]. While the removal of margin requirements may ease trading costs, it does not fundamentally alter the risks associated with a strengthening dollar, a divided Fed, and the potential for inflation to remain above target. The historical context shows that margin hikes by exchanges, such as those implemented earlier in February 2026, can exacerbate selling pressure by forcing liquidations [44]. The current market reaction to the dollar's uptick on February 18-19, 2026, driven by robust economic data and hawkish Fed signals, highlights the sensitivity of precious metals to such macro shifts [12, 13, 14]. The price action suggests that the margin relief, while welcome for traders, may be a temporary reprieve rather than a signal of sustained bullish momentum, particularly with geopolitical tensions in the Middle East and concerns over Iran resurfacing [43]. Mining stocks, while showing some recent strength, also carry industry-specific risks; for example, Northern Dynasty Minerals (NDM) has shown different risk and volatility profiles compared to GoldMining Inc. [11].
Outlook and Structural Support
Looking ahead, the long-term bullish structure for precious metals is supported by sustained central bank buying, ongoing de-dollarization trends, and robust industrial demand for silver, particularly from the renewable energy sector like solar power and electric vehicles [2, 7, 40]. Market experts suggest that despite near-term volatility, the broader trend remains intact. Jateen Trivedi of LKP Securities views gold as finding support near $4,850 on CME, requiring a decisive break above $5,000 for renewed bullish momentum, with MCX resistance seen around ₹1,55,000 [Original Text]. Gaurav Garg of Lemonn Markets Desk advises cautious trading while noting that safe-haven demand and steady central bank purchases provide underlying support on dips, framing the current environment as consolidation within a corrective phase rather than a trend breakdown [Original Text]. The success of gold mining equities, such as Aris Mining Corporation (ARMN) outperforming peers like Newmont Corporation (NEM) and Agnico Eagle Mines Limited (AEM), further indicates potential upside driven by operational improvements and strategic initiatives [27].