Gold has traditionally been deeply financialized. However, Silver is a metal that has been recognized for its rarity and usage. While being more affordable, Silver also stands out as a tactical investment both in physical and digital forms. With the launch of Silver ETF’s in 2022 access to the precious metal widened considerably.
The Rise of Silver ETF’s:
ETF’s emerged as one of the most prominent investment vehicles, with physical silver backing these digital papers. A fairly low expense ratio on the produce further accentuates it’s standing as a favored product from an investment and diversification perspective. In roughly 3 years of launch, Silver ETF’s have crossed the Rs.30,000 mark, and currently account for over 28% of the total passive fund flows as of September 2025. The demand has also risen from the fact that Silver ETF’s have delivered over 75% returns over a 1-year period ending October 2025. Several factors contribute to the growing interest in silver ETPs. First, silver’s inherent price volatility, coupled with a positive price outlook among many Indian investors, makes it an attractive tactical investment for those seeking potential gains. The ability to buy silver in fractional amounts has further led to an increase in the digital demand for Silver.
Phases of Growth:
A review of Indian retail investment since 2010 (the start of Metals Focus’ series) reveals three distinct phases: a period of strong growth until 2015; a sharp correction in silver prices accompanied by lower investment demand until 2020, and finally, a recovery with renewed interest. Local prices jumped nearly three-fold during the 2010-2015 period before correcting significantly by 2015. Following the 2015 peak, silver bar demand experienced a sharp decline, trading at around Rs.30,000s/kg, a substantial fall from its peak in 2013. The pandemic further disrupted supply chains and led to a reduced discretionary spending, which led to a significantly low price of Rs. 33,500/kg. The 2011 highs of Rs.73000/kg eclipsed yet again in 2020. After bottoming out in 2022, prices quickly strengthened, touching Rs.100,000/kg in October 2024 for the first time ever. The current price of silver, stands at Rs.1,90,000.
Why fund houses are closing Silver FoF’s?
Silver has found a multitude of uses as against Gold across multiple fields be it industrial, technological or automobile segments. Acute shortage of the white metal, which has led to prices soaring and the resultant rising premium have led to significant uncertainty around the way forward.
This has in turn led to a suspension of additional investments in Silver ETF for now from multiple fund houses like Tata, Kotak, UTI, Axis and SBI. The only exception to this being Nippon Mutual Fund, which is continuing to accept investments as of today. The significant premium that the white metal is currently trading at, relative to international prices, impacts the valuations of the ETF’s. With fund houses placing a temporary stop to ensure that investors don’t enter the fund at its peak valuation.
Here’s a list of reasons why ETF’s have temporarily stopped accepting investments into theit funds.
| Domestic Shortage of Physical Silver | The domestic market is short of physical silver; supply is constrained just when demand is spiking. This makes it hard for funds/ETFs to procure the actual silver needed to back new units. |
| Premium over International Prices / Import Parity | Due to that shortage, silver in India is trading at a significant premium compared to international benchmarks. Funds would have to buy silver at high local prices, making new units expensive and inflating cost for incoming investors |
| Market Volatility & Overheating | The rapid rise in silver prices (year‐to‐date, domestic and spot) combined with festive demand (Diwali etc.) and industrial demand (solar, electronics) has increased volatility. Entering now risks overpaying for a short-term inflated price which might correct later |
| Valuation Concerns / Risk to Investors Operational | As a result of premiums and supply constraints, the NAV (net asset value) of the funds / ETFs could diverge from the perceived fair value. |
| Regulatory / Risk | The mechanics of Silver ETF/FoF require physical silver backing. If that isn’t reliably available, the fund might struggle to maintain its structure, deliver redemptions or creation/redemption of units at fair price. Entering new money under distorted conditions risks mismatch or mis-pricing. |
While all the above factors exist, existing investors remain protected from this silver surge story.
