Silver ETF Surge: Domestic Prices Reach All-Time Highs as Festive Demand and Global Inflows Propel Rally
India’s silver market is experiencing remarkable growth in 2025, with domestic prices surging by 53% this year, outpacing gold’s 49% increase. This surge has led to a significant rise in investments in silver exchange-traded funds (ETFs), reportedly tripling those in gold ETFs. Market analysts note that global demand for silver-backed ETFs has reached unprecedented levels, with total additions in the first half of 2025 surpassing the entire inflows of 2024, pushing global holdings to a record high.
Record Inflows into Silver ETFs
The silver market’s robust performance has attracted considerable investment, particularly in silver ETFs. According to Axis Mutual Fund, inflows into these funds have tripled compared to gold ETFs. The first half of 2025 alone saw an impressive addition of approximately 95 million ounces of silver-backed ETFs, raising total global holdings to around 1.13 billion ounces, valued at over $40 billion. This surge in investment reflects a growing interest among investors in diversifying their portfolios with precious metals. Suranjana Borthakur, Head of Distribution & Strategic Alliances at Mirae Asset Investment Managers, emphasized the increasing popularity of passive ETFs, noting that while gold ETFs continue to perform well, silver ETFs are gaining traction as investors seek both allocation and returns.
Strong Returns and Market Dynamics
In 2025, silver ETFs have delivered impressive returns, with the Axis Silver ETF leading at approximately 86.67%, closely followed by the Mirae Asset Silver ETF at 86.63%. The Tata Silver ETF, while still performing well, recorded a lower return of 68.44%. This performance underscores the growing role of precious metals in investment strategies. Kartik Jain, MD & CEO of Shriram AMC, highlighted the importance of balancing traditional equity and debt strategies with strategic allocations to metals, which can enhance portfolios against economic uncertainties. The current market dynamics indicate that interest in both gold and silver is likely to persist unless there is a significant market correction.
Domestic Demand and Price Premiums
The domestic silver market is also witnessing significant premiums over international prices. Axis Mutual Fund reported that the premium for Indian silver surged from nearly 0.5% in early September to 5.7% by October 9, with intraday spikes reaching up to 12%. This increase is attributed to strong physical demand ahead of the festive season, including Dhanteras and Diwali, alongside global supply constraints. In September, India’s silver imports nearly doubled compared to the same month last year, as bullion dealers and jewelers sought to secure inventory amid soaring prices. Retail investors are increasingly turning to silver ETFs and fund-of-funds (FoFs), which has led to rising net asset values (NAVs) and challenges in fair valuation, particularly when ETF units trade above spot market prices.
Market Adjustments and Future Outlook
In response to the heightened demand, Kotak Mutual Fund announced a temporary suspension of lumpsum and switch-in subscriptions for its silver ETF FoF on October 10. Axis Mutual Fund cautioned that the local price premium could decrease once domestic supply normalizes. They noted that if India’s silver supply catches up, the premium embedded in ETF/FoF NAVs might reduce, even if international prices remain stable. Despite these short-term price distortions, silver is increasingly viewed as a strategic investment for the medium to long term, encouraging investors to maintain a multi-year investment horizon.
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