Silver Prices Surge: ETFs Trade at High Premiums as Investors Rush In — Should You Buy Now?
Silver prices have skyrocketed globally, sparking a wave of investor interest in Silver Exchange Traded Funds (ETFs). As prices hit record highs, many retail investors — driven by the fear of missing out (FOMO) — are jumping into silver-backed ETFs. However, experts warn that this may not be the ideal time to invest, as ETFs are currently trading at steep premiums and market fundamentals hint at short-term volatility.
Silver Crosses $50 Globally, ₹1.63 Lakh per Kg in India
On October 9, silver crossed the $50 mark per ounce in international markets for the first time, while domestic prices surged to ₹1.63 lakh per kilogram. The rally, fueled by soaring demand, has led to a shortage in physical supply — pushing ETF prices well above their actual net asset value (NAV).
A Silver ETF is a type of mutual fund traded on stock exchanges, designed to track the price of physical silver or related instruments. Each ETF unit represents a share of silver held by the fund, and investors can buy or sell these units like stocks.
ETFs Trading at 9–13% Premiums
According to Apoorv Sheth, Head of Market Perspectives and Research at SAMCO Securities, “Leading ETFs such as SBI Silver, HDFC Silver, and Axis Silver on NSE have surged between 9% and 13%, trading significantly above their NAVs.”
Sheth added that while ETF prices are rising sharply, MCX December silver futures actually fell 0.6%, showing that the rally is driven more by sentiment than by fundamentals. “This is a classic case of FOMO buying — retail investors fear missing the rally and are chasing returns without assessing the underlying market strength,” he said.
Kotak Suspends Fresh Lump-Sum Investments
Amid rising demand, Kotak Mutual Fund temporarily suspended fresh lump-sum investments in its Kotak Silver ETF Fund of Fund from October 9. Managing Director Nilesh Shah called it a “prudent move to safeguard investor interests.”
The fund house clarified that SIP (Systematic Investment Plan) and redemption requests will continue uninterrupted. Kotak AMC said it would reopen for new investments once the ETF premium stabilizes. This move highlights how fund managers are prioritizing investor protection during periods of market overheating.
Short-Term Spike, Long-Term Potential
Experts believe the current surge in silver may be short-lived. The sharp rally, they say, reflects temporary supply constraints rather than a sustained rise in long-term demand.
“When physical silver supply tightens, market makers face challenges in sourcing metal, leading to ETFs trading at a premium,” Sheth explained. “This imbalance between demand and supply is usually temporary.”
He cautioned investors against buying ETFs at inflated premiums and suggested waiting until prices normalize. “This is not the best time to enter silver ETFs. It’s wiser to wait for prices to align with NAV or for a market correction,” he added.
Silver’s Long-Term Outlook Still Strong
Despite short-term volatility, analysts maintain a bullish long-term outlook for silver. The metal remains a key industrial resource — especially in sectors like solar energy, electric vehicles, and electronics — which is expected to drive demand over the next decade.
Kotak Mutual Fund has also reaffirmed its positive long-term stance on silver. The AMC believes that after short-term corrections, the white metal will continue to play a crucial role in diversified portfolios as a hedge against inflation and currency fluctuations.
Should You Invest Now?
While the temptation to join the rally is strong, experts recommend patience. Buying ETFs at a premium could lead to short-term losses if prices stabilize or decline. For those with a long-term investment horizon, silver remains an attractive asset — but only at the right entry price.
Investors are advised to monitor NAV trends, ETF premiums, and global silver price movements before making new allocations. Waiting for the premium gap to narrow could help ensure better returns and reduce downside risk.
In short, the recent rally in silver ETFs is more about emotion than economics. Long-term investors should remain cautious, avoid chasing momentum, and enter only when valuations become reasonable again.
