The balloon lands: Silver's hot-air premiums collapse as ETF frenzy cools

After soaring above NAVs, ETFs correct as supply and demand finally reconcile

The recent rush into silver exchange-traded funds (ETFs) has cooled over the past two trading sessions, ending a streak that had driven their prices well above their net asset value (NAV).

 

Silver ETFs had traded at premiums of 5–10 per cent for five straight sessions starting October 9, after global silver prices crossed the $40-per-ounce mark. The gap, caused by a global shortage of physical silver, led several fund houses to temporarily stop taking new inflows into their silver fund-of-funds.

 

That strain now seems to be easing. On Friday, silver ETF prices broadly aligned with their indicative NAVs. Nippon India Silver ETF ended the day at ₹160.6, about 0.7 per cent below its NAV. Most schemes traded lower, with discounts widening to nearly 3 per cent in some cases.

 

The correction marks a return to more grounded valuations, even as spot silver prices stayed near record highs. As of Friday (October 17), silver ETF prices were down about 10 per cent from their 52-week peaks reached on October 14, while physical silver prices were just 2 per cent off their all-time highs.

 

Silver, like gold, has rallied sharply over the past six months, gaining nearly 60 per cent in the domestic market, driven by both investment interest and industrial use.

 

Though the rally is showing early signs of tiring as supply pressure eases, analysts say underlying demand should keep prices firm in the medium term.

 

“For the medium term (2026–2027), the tightening market structure could lift prices much higher. We see a base forming around $50–55 per ounce over the coming months, with possible peaks of $75 in 2026 and a steady climb towards $77 in 2027 on the Commodity Exchange (Comex),” Motilal Oswal observed in a report.

 

The bullish outlook rests on lasting demand drivers. “Silver is a strategic metal — central to modern electronics, solar power, and defence. Its dual role as both an industrial staple, accounting for about 59 per cent of total usage, and a safe-haven asset during geopolitical or economic turbulence, continues to anchor demand,” said N S Ramaswamy, head of the commodity desk and customer relationship management at Ventura Securities.