Why Are India’s Silver ETFs Trading at High Premiums?
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Synopsis
India's silver ETFs are witnessing steep premiums driven by festive demand and global supply constraints. Investment inflows are at record highs, signaling a robust market. Explore the implications for investors as physical silver scarcity continues to shape the landscape.
Key Takeaways
- India's silver ETFs are trading at significant premiums due to festive demand.
- Investment inflows into silver products have reached record highs globally.
- Physical silver demand in India has surged amid a tight supply situation.
- Short-term price distortions may pose risks for investors.
- Long-term investment in silver is viewed positively by experts.
New Delhi, Oct 11 (NationPress) India’s silver exchange-traded funds (ETFs) are currently experiencing significant premiums over international standards due to soaring festive demand and limited global supply, according to a report released on Saturday.
Investment inflows into silver products reached unprecedented levels worldwide in H1‑2025, adding approximately 95 million ounces, surpassing the total inflows of the entire previous year, as reported by Axis Mutual Fund.
This surge has elevated total ETF holdings to around 1.13 billion ounces (valued at over $40 billion) by mid-2025, according to Axis Mutual Fund.
While global mining output has seen only modest growth, it is projected to peak by 2026, even as demand from industries and investments rises, propelled by factors such as solar photovoltaics, electric vehicles, electronics, 5G infrastructure, and semiconductors.
Recent acquisitions by the central bank of Saudi Arabia have underscored a growing interest from other central banks in silver, further intensifying the demand shock.
In India, the physical demand has been exceptionally robust due to festive celebrations, with buyers accumulating silver in various forms—coins, bars, jewelry, and idols. This purchasing frenzy has led to a doubling of imports in September year-on-year, as bullion dealers and jewelers rushed to secure inventory despite the record-high prices, the report stated.
This shortage has impacted ETFs, which are trading at premiums ranging from 5% to 12% above converted LBMA prices, inclusive of customs and GST, according to Axis MF.
Typically, any disparity between Indian and global prices is minimal and quickly arbitraged away. However, in the current context, where physical silver is scarce, the premium remained consistent, and even ETF arbitrageurs could not swiftly reconcile the difference, as noted by the fund house.
Axis MF cautioned that the inflated entry prices pose a risk of a near-term NAV correction if supply stabilizes and the domestic premium dissipates. For medium- to long-term investors, silver is increasingly recognized as a strategic diversifier and hedge, with short-term price fluctuations potentially being less relevant for multi-year investment horizons, the fund house noted.
Point of View
It is crucial to understand the dynamics affecting India's silver ETFs amidst festive demand and global supply challenges. The current situation highlights the importance of silver as a strategic asset for investors, while also cautioning about potential price corrections. Our commitment is to guide readers through these complexities with well-researched insights.
NationPress
11/10/2025
Frequently Asked Questions
Why are silver ETFs in India trading at a premium?
Silver ETFs in India are trading at a premium due to increased festive demand and limited global supply, creating a disparity between local and international prices.
What factors are driving the demand for silver?
The demand for silver is being driven by various sectors, including solar energy, electric vehicles, and technology, alongside a surge in investment interest.
How have imports of silver changed recently?
India has seen a doubling of silver imports in September compared to the previous year, driven by heightened demand during the festive season.
What risks do investors face in the current silver market?
Investors may face risks of price corrections if supply normalizes and the current premiums dissipate, impacting short-term investments.
Is silver considered a good long-term investment?
Many financial experts view silver as a strategic diversifier and hedge, making it a favorable option for medium- to long-term investors.
