Here are top three reasons why Gold ETFs are falling on Thursday

Gold ETFs are buzzing in Thursday’s trade after the gold price witnessed a wild swing in global markets on Wednesday. Gold has been rallying relentlessly for the past three months and overall jumped more than 60% in one year. The sharp rally has led investors to shift their incremental inflows into gold investments through ETFs, gold funds and SGBs.

Popular gold ETFs from major AMCs like Nippon India have delivered more than 64% returns in one year, rising from ₹65 per unit to ₹108 per unit. After a sharp and relentless rally, gold ETFS witnessed heavy selling pressure on Thursday after global gold prices witnessed the biggest single-day drop in prices in more than a decade. In tandem with the global gold prices, the ETF prices also plunged from record high levels by over 6% on Thursday.

Here are the key reasons why gold ETFs were slashed on Thursday

Easing global tensions

The geopolitical situation around the globe is receding fast as wars in the Middle East came to an end, while the situation in Ukraine and Russia also remains under control. On the economic front, the trade wars continued to rattle the global trade and economy. However, the negotiations on the sidelines are expected to soften the current situation on the trade war front soon. The US President Donald Trump is expected to meet his Chinese counterpart soon and is preparing for a strong trade deal.

Profit booking

After a sharp and relentless rally in gold and silver prices, investors are now taking some profit off the table and hoping for some cooling off in gold and silver prices. Gold ETFs, which were trading at premiums due to high demand, are trading slightly below their iNAV (indicative net asset value), indicating reduced demand for ETF units against the supply. Retail investors who flocked to the gold ETFs even at a premium to the iNAVs are now witnessing sharp declines in the asset value after a plunge in gold prices. Experts believe, gold prices could see some cooling off in the coming months as uncertainty reduces on the geopolitical front. However, if the situation on the trade war worsens between China and the USA, gold prices could regain the lost momentum.

Strong US dollar

The gold price rally in 2025 was primarily driven by the sharp and consistent buying of gold by the global central bank. As the fiscal situation in the US remains brink, the trust in the US government securities has reduced, which has led to a weakening of the dollar from the record high levels. However, the US dollar has gathered some momentum and strength in the past few weeks as investors await crucial inflation data ahead of the important Federal Reserve policy meeting next week. The US dollar has jumped nearly 3% from the recent lows touched in September.

(Source: NSE, price at 11:56 am)