Silver Supply Crisis Deepens: Indian ETFs Halt New Investments as Prices Soar to Record Highs
India, the world’s largest silver consumer, is currently facing a severe silver supply crunch that has disrupted the precious metals market. The situation has forced major asset management companies (AMCs) such as UTI and Kotak Mahindra to temporarily halt fresh investments in their Silver Exchange Traded Funds (ETFs). This unprecedented step comes amid skyrocketing silver prices and a widening gap between domestic and global market rates.
UTI Temporarily Suspends New Silver ETF Investments
UTI Asset Management Company (UTI AMC) announced on Saturday that it would suspend new lump-sum and switch-in investments in its UTI Silver ETF Fund of Fund starting October 13, 2025. According to the company, this move is a direct response to the current shortage of physical silver in the domestic market.
UTI AMC clarified that Indian silver prices are now trading at a significant premium compared to international benchmarks. This divergence affects the fund’s valuation and increases the difficulty of efficiently managing investor inflows.
Kotak AMC Takes a Similar Step
This is the second major suspension of its kind in the same week. On Thursday, Kotak Mahindra Asset Management Company also halted new investments in its Silver ETF Fund of Fund, citing the same supply constraints. Kotak AMC mentioned that the restriction is temporary and may be lifted after Diwali, once physical silver availability improves.
Silver Prices Hit Historic Highs
Silver prices are witnessing an extraordinary rally. In the international market, spot silver climbed to $51.22 per ounce — breaching the $51 mark for the first time in history. Meanwhile, in India, silver prices have soared to record highs. In Delhi, silver touched ₹1,74,000 per kilogram on Saturday — a sharp jump of ₹7,000 in just one day.
This sharp increase has widened the price premium between MCX (Multi Commodity Exchange) rates and the spot market, with domestic silver now selling ₹20,000 higher per kilogram than exchange-traded levels.
Why Silver Prices Are Rising
Experts attribute this surge to a combination of strong industrial and jewelry demand, especially during India’s festive season, and limited supply from global producers. According to market analysts, industrial usage accounts for 60–70% of total silver demand, and sectors like solar energy, electronics, and electric vehicles are major consumers.
The All India Jewellers and Gold Federation (AIJGF) National Secretary and KediaFintech.com founder Nitin Kedia stated that the Indian silver market is experiencing “unprecedented bullish momentum.” He explained that the high demand for physical silver and increased global premiums are pushing domestic prices to historic levels.
Global Disparity and ETF Pressure
In global markets, the COMEX futures and spot silver prices are currently showing a 250-cent gap — the widest in history — indicating a visible supply strain. ETFs worldwide are under pressure as their physical holdings are depleting faster than replenishment rates, further intensifying scarcity.
According to Kedia, “Rising ETF inflows have significantly tightened the physical silver market. The current environment is so aggressive that some investors are even mortgaging gold or diverting construction funds to buy silver, believing the metal may soon become unavailable.”
Investor Sentiment: Excitement and Caution
As the gold-to-silver ratio drops to 78.80, analysts believe investors are increasingly shifting their focus toward silver. However, experts warn that the ongoing price frenzy also carries high risk.
Kedia advised, “While silver’s long-term outlook remains positive, investors should avoid emotional buying at current elevated levels. The sustainability of this rally will depend on industrial demand, ETF inflows, and global monetary policies.”
Conclusion
The silver market’s sharp rally reflects both strong fundamental demand and structural supply limitations. With multiple AMCs freezing new silver ETF investments, the tension between investor enthusiasm and physical availability continues to grow.
As India heads into its festive season, experts recommend investors remain cautious yet optimistic, ensuring their investment decisions align with long-term goals rather than short-term price surges.
