Current Trends in Silver ETFs
Major silver exchange-traded funds (ETFs) are currently trading at approximately a 10% premium to their benchmark net asset values (NAVs). This surge follows a remarkable increase in silver prices, which have more than doubled—rising by 108% by 2025.
As a result, leading silver ETFs have stopped making large scale investments. In fact, these ETFs have outperformed many widely traded assets, achieving an average gain of 94.3% through 2025.
Investment advisors and financial experts are suggesting it’s probably wise to avoid silver ETFs right now, even if they’re still available for purchase. Investors might want to hold off until silver prices stabilize and are more aligned with their actual value before committing any funds to these ETFs. A brief overview of silver ETFs and advice for investors after such price spikes follows.
Why Are Silver ETFs Priced at a Premium?
Currently, the physical silver market is experiencing supply issues, which has led to these ETFs trading at a notable premium compared to their index NAV. ETF managers are having trouble sourcing the actual silver needed to create new units due to heightened demand.
“When demand surges but the supply of ETF units can’t keep up, the ETF price exceeds its index NAV, resulting in a premium,” explains Rupesh Nagda, CEO of Family First Capital Advisors, based in Mumbai.
“Investors who overlooked silver when prices were low are now rushing to buy silver ETFs, even at a higher premium,” said Apurva Sheth, head of market research at SAMCO Securities. “Suddenly, with prices around 150,000 rupees per kg, everyone seems to want to get in on it.”
On the National Stock Exchange, leading silver ETFs are trading at a premium between 9% and 13% above their index NAV. The enthusiasm is palpable; despite falling December futures for silver on MCX, ETFs are soaring, suggesting that excitement, rather than fundamentals, is driving this price chase.
“This is a classic case of FOMO,” or fear of missing out, Sheth notes. “We often see this behavior near short-term peaks, where investors realize too late that they missed the bull run.” On the supply side, constraints remain. For four consecutive years, global demand for silver has outstripped supply, with an anticipated shortfall of 148.9 million ounces in 2024 and 117.6 million ounces in 2025. The shortage is expected to persist due to new developments involving Silver Limited’s mines.
Interestingly, silver’s recent rally is not only driven by safe-haven demand; it’s also being recognized as an industrial asset. The U.S. officially classified silver as a critical mineral in August, noting its significance in solar panels, electric vehicle batteries, 5G networks, and medical devices. Furthermore, institutional investments are on the rise. Saudi Arabia’s central bank is now putting money into silver ETFs, following substantial accumulations by Russia.
What Is a Silver ETF and How Does It Work?
Silver ETFs are relatively new in the mutual fund landscape—most have been around for less than four years. Yet, they’ve quickly gained investor attention, bringing in about $500 million in assets in a short while. These ETFs invest their funds in physical silver, issuing units proportional to silver’s market price.
How Has Silver Performed in the Past?
Over the past few years, silver has had quite a volatile journey. It reached an all-time high in 2011 and then climbed 12% in 2012. However, the following years were less favorable; prices dropped 24.3% in 2013 (the largest decline in a decade), followed by further losses of 15.6% in 2014 and about 8% in 2015.
From 2010 onward, silver recorded negative returns in five out of ten years. Aside from the notable upswing in 2016, it was generally a poor-performing asset from 2013 to 2018, with losses ranging from 2.1% to 24.3%.
What Do Fund Houses Do?
Major fund houses have paused large investments in silver ETFs. “This precautionary measure is being taken to inform investors that, due to current market conditions and the shortage of physical silver locally, silver is trading at a premium compared to international prices. Hence, the domestic premium directly affects the scheme’s valuation,” they stated.
For example, Tata Mutual Funds announced a temporary suspension of all new lump-sum investments, switches to the scheme, and new registrations of SIPs and STPs effective from October 14. However, they confirmed that existing SIPs and STPs would continue as scheduled.
“Any purchase, switch-in transactions, or new registrations of SIP/STP made before 3:00 PM on October 13 will be processed at the applicable NAV,” Tata MF noted. They also reassured investors that during this suspension, redemptions and other transactions would still be allowed, emphasizing that the pause is temporary and will remain in effect until further notice.
What Is the Outlook for Silver?
Silver has a strong link to industrial usage. If industrial production picks up, silver prices are likely to rise as well. Therefore, those investing in silver ETFs should keep a close eye on trends within the manufacturing sector, as this is closely tied to the growth of silver.
