Silver prices could rise, but your ETF may not. Here’s why

Silver’s glittering run this year has left investors excited, but experts say the shine on silver exchange-traded funds (ETFs) may not match the metal’s rally in the near term. While Emkay Wealth Management expects silver prices to surge as high as $60 per ounce over the next year—reflecting a potential 20% rise—analysts caution that ETF investors could face steep losses given the elevated valuations could induce premiums to cool off.

Silver investors have already enjoyed a spectacular rally in 2025, with prices soaring nearly 90% so far this year. Globally, silver is trading around $49 per ounce—hovering near record highs—as political and economic uncertainty fuels safe-haven demand. On the Comex, silver has jumped roughly 70% year-to-date, while on the MCX, prices have gained about 71%.

Emkay Wealth Management attributes the bullish outlook to robust industrial demand and a persistent supply deficit of around 20%, which is expected to continue in the near term. But even as silver’s fundamentals remain strong, ETF prices in India have detached from the metal’s actual value due to an acute supply crunch.

According to Mirae Asset Management, trading volumes in silver ETFs have surged dramatically this year. The average daily trading volume, which stood at Rs 77.53 crore in 2024, has shot up to Rs 211.76 crore till September 2025. In September alone, the figure spiked to Rs 642 crore. Over the three months ending August, silver ETFs saw net inflows of about Rs 5,700 crore.

However, on October 9, silver ETFs in India spiked sharply even though international silver prices remained stable. The reason: a shortage of inventory among commodity traders who act as market makers. With “low to negligible inventory” of LBMA-certified silver bars—the only type permitted for procurement by silver ETFs—market makers began quoting higher prices both on and off exchange.

This led to a rare situation where ETFs traded at a 5% to 10% premium over their net asset value (NAV). For instance, the Mirae Asset Silver ETF closed at Rs 156.52 on October 9, compared with a NAV of Rs 149.11 a day earlier, it said in a note.Typically, MCX futures serve as the benchmark for silver prices in India, and physical silver trades at a small premium or discount relative to it. But the ongoing supply crunch has distorted this relationship, pushing acquisition costs sharply higher.Mirae Asset has warned investors to be cautious while making fresh purchases in silver ETFs, as high premiums increase entry costs. If silver prices stay flat and premiums normalize, investors could suffer mark-to-market losses as prices realign.

Following this market distortion, several fund houses—including Kotak Mutual Fund, UTI Mutual Fund, and now SBI Mutual Fund—have suspended fresh subscriptions in their silver ETF funds of funds (FoFs) from October 13. SBI MF said the move was aimed at protecting investor interests amid abnormal market conditions.

Existing systematic investment and transfer plans will continue as usual, and investors can redeem or switch out their units.

While Emkay Wealth Management remains optimistic about silver’s long-term prospects, it also expects short-term consolidation after the steep rally. For now, investors may be better off waiting for ETF premiums to cool before adding more shine to their portfolios.