The dazzling rise in silver prices, the best-performing asset that has more than doubled in value, with a gain of 108% so far in 2025, has resulted in major silver ETFs (Exchange Traded Funds) trading at a premium—approximately 10% above their indicative net asset value (NAV).
This has resulted in major silver ETFs suspending lumpsum investments into their schemes. Incidentally, silver ETFs are the best performers among widely traded assets, having surged 94.3% on average so far in 2025.
Investment advisors and experts say that it is better to avoid silver ETFs now, even if purchases are allowed, as they have seen a huge rally. Investors should wait for prices to cool down and align closely with the actual NAVs before committing money to silver ETFs. Here is a guide on silver ETFs and what investors should do following the sharp rise in prices.
Why are silver ETFs quoting at a premium?
There is currently a supply constraint in the physical silver market, resulting in major silver ETFs trading at a significant premium to their indicative NAV. As a result, ETFs are unable to easily issue new units to meet heightened investor demand. ETF custodians are finding it difficult to source physical silver for the creation of new ETF units.
“When demand surges but the supply of ETF units is restricted, the price of the ETF surpasses its indicative NAV, causing it to trade at a premium,” says Rupesh Nagda, founder and CEO, Family First Capital Advisors, a Mumbai-based investment boutique.
“Investors who ignored silver when it was languishing below ₹1 lakh are now rushing to buy silver ETFs, even if it means paying a hefty premium over their indicative NAVs,” says Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities. “Silver hit ₹1.50 lakh per kg (on October 9) — and suddenly, everyone wants a piece of the metal,” he says.
On NSE (National Stock Exchange), top-traded silver ETFs were quoting at premiums of 9%–13% to their indicative NAVs. The frenzy is so strong that while ETFs are soaring in double digits, MCX Silver December Futures is trading lower— showing that retail enthusiasm, not fundamentals, is driving the price chase.
“This classic case of FOMO (Fear Of Missing Out) buying mirrors what we often see near short-term peaks — when investors realize too late that they missed the rally,” Sheth says. On the supply side, constraints remain tight. Global demand for silver has outpaced supply for four straight years, with a 148.9-million-ounce deficit in 2024 and another 117.6-million-ounce shortfall expected in 2025. With new mine developments for Silver Limited, deficits are here to stay.
“Silver’s rally is not only about safe-haven demand — it is being redefined as an industrial powerhouse,” market experts say. The US officially added silver to its ‘Critical Minerals List’ in August this year, recognising its central role in solar panels, EV (Electric Vehicle) batteries, 5G networks, and medical devices. At the same time, institutional flows are strengthening. Saudi Arabia’s central bank has invested in silver ETFs, following Russia’s earlier accumulation.
What are silver ETFs and how do they work?
Silver ETFs are relatively new to the mutual fund investment landscape. The oldest ETF is less than four years old. But they have managed to attract the attention of investors. Silver ETFs have garnered assets under management (AUM) of about ₹45000 crore within a short span of time. Silver ETFs invest the money they collect in physical silver for which they issue units in proportion to the price of the white metal.
How has silver performed in the past?
Silver has had a rollercoaster ride over the past few years. The white metal hit a new high in 2011 and gained 12% in 2012. But it lost lustre in the next three years. Silver prices fell 24.3% in 2013, its biggest tumble in a decade, dropped 15.6% in 2014, and by nearly 8% in 2015.
The white metal generated negative returns in five out of 10 years during the decade that started in 2010. Barring 2016, silver actually was a loss-making asset for investors between 2013 and 2018. The losses were in the range of 2.1% to 24.3%.
What are fund houses doing?
Major fund houses have stopped lumpsum investments into silver ETFs. “This is to inform investors that, due to prevailing market conditions and the shortage of physical silver in the domestic market, silver is trading at a premium relative to international prices. Therefore, the premium in domestic silver prices directly impacts the valuation of the ‘Scheme’.
In light of the current market scenario, Tata Mutual Fund has decided to temporarily suspend all lumpsum investments, Switch-in into the scheme & fresh registration of Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP) into the scheme from the effective date (October 14),” Tata MF said in its addendum to investors. “All existing SIP and STP registered under the scheme shall remain operational,” it said.
“Purchase, Switch-in transaction, fresh registration of SIP / STP received into the ‘Scheme’ time stamped on or before 3.00 PM of 13th October, 2025, shall be accepted and processed at applicable NAV (Net Asset Value),” Tata MF said.
“Please note that during this suspension period, Redemptions, Switch-out, Systematic Withdrawal Plan (SWP) will continue to be permitted in accordance with the terms outlined in the Scheme Information Document. The aforesaid suspension is temporary in nature and shall continue only till further notice in this regard,” the fund house said.
What is the outlook for silver?
Silver is closely associated with industrial consumption. If there is an increase in industrial production, silver will do well. So, investors in silver ETFs should keep track of how the manufacturing sector is doing, as it has a close correlation with the growth of the white metal.
Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.
