MUMBAI: The record rally in the prices of silver—having peaked in returns at 65% earlier this week compared to that of gold, which has rallied only 55% this year so far, its digital version in the form of exchange traded funds (ETFs) are trading at a steep premium of 5-12% now, thanks to the rally coupled with the festive demand, demand from central banks, leading to short-supplies as mining is muted.
This shortage and excess demand have flowed through to ETFs, which are trading at a steep premium of 5–12% over the converted imported prices inclusive of customs and GST, Axis Mutual Fund said in a report Saturday.
According to the note from the fund house, this confluence of factors has pushed total silver ETF holdings in the country to roughly 1.13 billion ounces which is worth over $40 billion by mid-2025.
It can be noted that on October 8, the safe-haven demand has seen gold and silver shattering all records and breaching the psychologically sensitive $4,000-per ounce mark globally and in the domestic market--peaking at $4020/oz for spot gold and $4,070/oz futures and silver futures breaching the $50/ounce mark and spot silver at $48.44/ounce). In the domestic prices crossed of gold crossed Rs 1.22 lakh/10 grams and silver futures rising to Rs 1,47,013 per kg. Gold has so far given more than 55% since the beginning of this year on the back of a 27% rally in 2024 and another 24% in the previous year while silver has returned more than 65% during this time.
The rally is being driven by a cocktail of factors, including expectations of more interest rate cuts, ongoing political and economic uncertainty, the lingering US Federal shutdown, solid central bank buying (major central banks have snapped up 15 tonnes so far this year, which is though is much lower than last year’s 90 tonnes), inflows into gold exchange-traded funds and a weak dollar.
According to the World Gold Council, net inflows into domestic gold ETFs totalled $902 million in September, a 285% increase from $232 million in August. This was the fourth consecutive month of inflows, and all months of 2025 saw positive traction except for March and May.
According to Renisha Chainani, head of research at glod-trading platform Augmont, gold can show more upward spikes towards $4150 or Rs 1,25,000, while spot silver can easily cross $50 or Rs 1,50,000.
A key reason for silver rally is the muted mining of silver this year so far but industrial and investment demand has been on a steady climb driven by solar photovoltaics, electric vehicles, electronics, 5G infrastructure, and semiconductors, Axis AMC report said.
The domestic silver exchange‑traded funds (ETFs) are trading at steep premiums over international benchmarks amidst surging festive demand and constrained physical global supply, Axis AMC said. Investment inflows into silver products hit record levels globally in H1 of 2025, adding about 95 million ounces, exceeding the total inflows of the entire previous year.
This also has pushed total ETF holdings to roughly 1.13 billion ounces (worth over $40 billion) by June 2025, the fund house report said.
According to the report, another reason is the heavy demand form central banks, which have also been snapping up gold since the past many years. Among the central banks snapping up silver is that of the Saudi Arabian central bank, amplifying the demand shock.
Meanwhile, physical demand in the domestic market has also been exceptionally strong due to festive demand, with buyers snapping up silver in all forms--coins, bars, jewellery, and idols. Already silver import has doubled in September as bullion dealers and jewellers scrambled to secure inventory despite record-high price, the report said.
This shortage has flowed through to ETFs, which are trading at a steep premium of 5–12% over the converted imported prices inclusive of customs and GST, the report said, adding under normal conditions, any gap between domestic and global prices would be small and arbitraged away. But in the current scenario, with physical silver scarce, the premium persisted, and even ETF arbitrageurs cannot immediately bridge the difference, the report noted.
The report warns that the inflated entry price risks a near-term NAV correction if supply normalises and the domestic premium evaporates. For medium- to long-term investors, silver is increasingly viewed as a strategic diversifier and hedge, and short-term price distortions may be less relevant for multi‑year horizons.
