Here's why silver ETFs crashed up to 24% even as silver futures on MCX declined only 4%

Silver ETFs

• Indian silver ETFs fell 24%, more than silver futures' 4% drop.
• ETF prices corrected as speculative premium unwound after no import duty relief
• Experts advise staggered ETF purchases to manage volatility and timing risk

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Silver exchange traded funds (ETFs) tumbled up to 24 percent in trade on January 22 amid easing tariff concerns. This came even as the future contracts of the precious metal fell only up to 4 percent on MCX.

Analysts have explained why ETFs saw a sharper crash than silver itself, and what investors should do in such times of decline.

Why silver ETFs fell more than silver itself?

Tata Silver Exchange Traded Fund saw the most decline on January 22, declining nearly 24 percent to its day's low of Rs 25.56 apiece before recovering some losses.

Silver futures with March expiry meanwhile dropped 4 percent to its day's low before recovering some losses.

The sharper fall in silver ETFs compared to silver futures on MCX is largely a function of how Indian silver had moved into a speculative premium ahead of the Budget, rather than a sudden collapse in underlying global fundamentals, said Harshal Dasani, Business Head at INVasset PMS.

He highlighted how silver on MCX, which represents Indian prices, had outperformed COMEX levels, which represent global prices, over the past two sessions. The analyst explained that this was mainly driven by expectations around an import duty tweak or a policy signal in the Budget.

"At its peak, Indian silver was trading near $107 per ounce, almost $13 above the COMEX price of around $94, which is an unusually wide premium by historical standards," he said.

Dasani added that the premium that Indian silver prices enjoyed over global prices was not driven by physical tightness alone - it was largely sentiment-led and expectation-driven. "Once it became clear that no immediate duty relief was forthcoming, that excess premium started unwinding," he said.

Explaining the sharper fall in ETFs, Dasani said that they are priced off domestic spot benchmarks but also reflect investor flows and arbitrage pressures. Hence, they tend to react faster in such "premium collapse" phases. "When retail investors rush to book profits, ETF units face additional selling pressure even if MCX futures are still stabilizing," he said.

"So what we are seeing is not a bearish signal on silver as an asset class, but a normalization of an India-specific price distortion that had built up ahead of a policy event," he added.

Hence, today’s fall shows that the ETF price is getting rationalised and more aligned with the actual market price of the metal. Amar Ranu, Head - Investment Products & Insights, Anand Rathi Share and Stock Brokers Limited, said, "Gold and Silver ETFs saw significant drawdowns today...thereby bringing the ETF’s price almost in line with domestic physical and international market prices. (MCX prices of silver have dropped by 3% - 4%in comparison)."

What should you do?

Despite price swings, fundamentals are compelling, driven by near-record industrial demand from solar panels, electric vehicles, and AI infrastructure, said Tanvi Kanchan, Associate Director, Anand Rathi Share and Stock Brokers.

The analyst however cautioned that after the record bull run, timing a single entry point is "treacherous". "Rather than deploying capital all at once, investors should consider spreading purchases over the coming weeks or months. This approach captures the dip while protecting against further corrections that could see silver test," she said.

"For conservative investors, allocating 5-10% of portfolios to precious metals ETFs through systematic purchases reduces timing risk while maintaining exposure to an asset class that benefits from geopolitical instability and monetary policy uncertainty. The structural deficits and industrial demand provide a floor, but expect continued volatility as the market digests 2025's historic run," she added.

To check if a silver ETF is at premium or discount against MCX prices:

1. Find daily NAV on AMC site (for example, Nippon India for Silver Bees) or NSE India/Moneycontrol.

2. Compare to live market price on NSE/BSE.

If market price is greater than NAV, then the ETF is trading at a premium to MCX price. If it is lower than NAV, then the ETF is at a discount.

Fair NAV is calculated from MCX silver closing price minus expenses, and is updated daily by AMC.