MUMBAI: Silver exchange-traded funds (ETFs), which had been trading at a significant premium to international prices, plunged by as much as 24% on Thursday, wiping out much of that excess. The sharp correction followed a global and domestic pullback in prices after US President Donald Trump stepped back from his bid to annex Greenland by force, easing safe-haven demand for precious metals. Profit-taking further accelerated the decline. However, as the session progressed, silver prices recovered most of their losses.
Traders said the retreat from the record highs came as the dollar strengthened and risk appetite improved globally, reducing demand for safe-haven assets. The slump was far sharper than moves in global spot and MCX futures, highlighting extreme volatility amid shifting risk sentiment, profit-booking and geopolitical easing.
Since last weekend, gold and silver prices have surged sharply after US President Donald Trump threatened to use military force to acquire Greenland, escalating tensions between the United States and the European Union. The situation intensified further after Trump announced a 10% tariff on eight of NATO’s largest members for opposing the move, effective next month. In response, the EU signaled plans to impose reciprocal tariffs on US goods. These tariff threats heightened geopolitical uncertainty, prompting a risk-off sentiment in global markets and driving investors toward safe-haven assets such as gold and silver.
Even as silver futures eased only 4%, the fall in silver ETFs was much starker and the worst hit are Tata that crashed almost 24% to Rs 25.56, Edelweiss and Mirae Asset plunged 22% each and 360 One lost 21%, and Nippon shed 20% on NSE. Earlier in the day the silver futures eased 4% on MCX in early trade t0 Rs 305,753/kg, but soon recovered as the CME began to show recovery. At 1430 hrs, however the prices recouped and was down just about 1.13% or Rs 3,592/kg at Rs 314,900.
One of the reasons for the sudden domestic recovery was the recovery in on the CME where the white metal was trading 1.5% higher at $94.10/oz at 1445 hrs, only marginally down from the $95.36 it had scaled on Tuesday while gold was flat at $4835/oz but almost 2% down from the peak on Tuesday when it had rallied past $4875.
According to analysts, after the Trump climb down on Greenland investors are questioning the need to hold gold and silver, leading to aggressive selling in silver, particularly in ETFs. But the sharper correction in the domestic prices was primarily because in the domestic market the white metal was enjoying a speculative premium ahead of the budget, rather than a sudden collapse in underlying global fundamentals.
Despite the sharp fall in silver ETFs, most are still trading at a premium to their net asset values. This premium was driven by rumours of an import duty hike in the upcoming budget and speculative buying by investors.
At its peak, domestic silver was trading near $107/ounce, almost $13 above the CME price of around $94, which is an unusually wide premium by historical standards. This premium was not driven by physical tightness alone but was largely sentiment-led and expectation-driven.
Silver ETFs are priced off domestic spot benchmarks but also reflect investor flows and arbitrage pressures, and thus tend to react faster in such premium collapse and when retail investors rush to book profits, ETF units face additional selling pressure even if MCX futures are still stabilising.
Manav Modi, commodities analyst, Motilal Oswal Financial Services, said NAV calculations for mutual funds are very different from MCX price movements.
“Any event or price move is first reflected in futures prices, while NAVs are calculated with a lag. Because of the difference in timings, ETFs (which close at 3.30 pm) don’t always catch up with MCX moves immediately,” he said.
Modi also believes ahead of the budget, this spread tends to widen further. Since ETF prices had risen sharply despite the disparity, we’re seeing profit booking at higher levels, expecting inflows to resume once the budget-related uncertainty settles.
The market is divided between those viewing corrections as buying opportunities and those warning of overheated conditions, said Tanvi Kanchan, an associate director at Anand Rathi Share & Stock Brokers. Despite price swings, fundamentals are compelling, driven by near-record industrial demand from solar panels, electric vehicles, and AI infrastructure, she said.
“Given the current geopolitical landscape—from ongoing conflicts in the Middle East and Ukraine to US-China tensions and uncertainty around trade policies under the new Trump administration—precious metals maintain their relevance as portfolio hedges,” she said but cautioned that after such explosive threefold gains in 2025, timing a single entry point is treacherous.