Silver outlook: Book profit and rebalance if allocation exceeds 5-7%

New investors should enter in a staggered manner with an over five-year horizon

On September 8, 2025, silver touched a closing high of ₹124,413 per kilogram. This industrial-cum-precious metal is up 49.3 per cent in the Indian market over the past year. After this massive rally, experts suggest that investors exercise caution.

 

Drivers of the rally

  Industrial demand, which accounted for 58.6 per cent of the total demand for silver globally in 2024, according to the Silver Institute, is a key driver of price. “There is strong global demand from green technologies like solar panels and electric vehicles,” says Niranjan Avasthi, senior vice-president, Edelweiss Mutual Fund.

 

Supply-side constraints have also contributed to the price rise. “Global silver supply has constantly lagged demand since 2021,” says Chintan Haria, principal – investment strategy, ICICI Prudential Asset Management Company (AMC).

 

Safe-haven demand from investors has also risen amid high geopolitical tensions. “Central banks, which have traditionally bought gold, have started adding silver to their reserves,” says Arihant Bardia, chief investment officer and founder, Valtrust. The US has even proposed classifying silver as a critical mineral. A weakening rupee has also boosted domestic prices.

 

Dependent on global growth 

If global growth weakens, the industrial demand for silver could soften. Haria points out that profit booking could also weigh on prices. Avasthi warns that higher US rates, though unlikely at present, may hurt silver. Silver also tends to be quite volatile. Its volatility could deter many investors.

 

“In India, changes in duties or a sharp move in the rupee could cause short-term swings,” says Bardia. 

 

Longer-term prospects intact

  Investors are now questioning whether silver can rally further after such a sharp rise. “Silver, however, remains well supported by the clean energy transition and investment demand,” says Avasthi. While not ruling out some consolidation, Haria says that structural demand from both traditional and new-age industries is expected to sustain momentum.

 

The gold-to-silver ratio is around 85x, compared to its long-term average of about 70x. “This suggests that silver has the potential to catch up and that the rally may have further room to run,” says Alekh Yadav, head of investment products, Sanctum Wealth.

 

Stick to asset allocation

  Experts suggest caution after the rally. “The recent surge in silver looks speculation-driven and reflects recency bias,” says Shweta Rajani, head – mutual funds, Anand Rathi Wealth.

 

“Existing investors should maintain an allocation of 5–7 per cent in silver,” says Naval Kagalwala, chief operating officer and product head, Shriram Wealth. Those who have exceeded their original allocation should consider partial profit booking.

 

New investors should avoid short-term tactical entries and instead opt for staggered buying via ETFs to manage volatility. “The best approach is to avoid lump-sum investments at peak levels. Instead, start or continue with a systematic investment plan (SIP), which will help average out the cost and reduce the impact of short-term volatility,” says Rajani. Kagalwala adds that an over five-year horizon is needed to benefit from investing across economic cycles.

 

Silver is more volatile than gold, with higher maximum drawdowns and standard deviation. “It is suitable for high-risk investors, while conservative investors should avoid it,” says Yadav.

 

Run these checks 

Altogether, 16 exchange-traded funds (ETFs) from various fund houses are available. Check the expense ratio (which should be low) and liquidity of the ETF on the exchange (higher is better).

 

Rajani highlights the importance of tracking error, which indicates how closely an ETF follows the price of silver (lower is better). Kagalwala says fund-of-funds (FoFs), which invest in silver ETFs, may also be considered for better liquidity.