Silver ETF AUM doubles in a year, outpaces gold ETFs despite lower returns

Over the last one year, price of gold in dollar terms has spiked 43.16 percent, while silver has jumped 23.59 percent.

The growth of silver exchange-traded funds (ETFs) has outpaced that of gold ETFs in the last one year even as gold prices have outperformed the white precious metal during this period.

Over the last year, since June 2024, the AUM of silver ETFs has grown from Rs 7,473.34 crore to Rs 16,866.20 crore as of May 2025, a growth of 125.68 percent. During the same period, the AUM of gold ETFs grew by 81.78 percent, from Rs 34,355.75 crore to Rs 62,452.94 crore.

As of May 2025, there were over 8.37 lakh silver ETF investor folios, showing that Indian investors are taking exposure to silver via the mutual fund route. There were over six lakh investor folios as of January 2025.

In November 2021, the Securities and Exchange Board of India (SEBI) allowed Indian fund houses to launch silver ETFs.

Since then, their assets under management (AUM) have crossed the Rs 16,500 crore mark as of May 2025. In May 2025, silver ETFs saw net inflows of Rs 853.85 crore against net buying of Rs 291.92 crore on gold ETFs.

Over the last one year till June 10, the price of gold in dollar terms has spiked 43.16 percent, while silver has jumped 23.59 percent.

Note that the higher AUM growth for silver ETFs has come on a lower base.

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Demand outpaces supply

Since 2021, the demand for silver has outpaced its supply. This metal is both a valuable commodity and a crucial component in various industries, including solar energy and automotive manufacturing.

Silver's diverse applications, from industrial uses to jewellery, digital photography and investment, also contribute to its demand.

"Historically, silver and gold have some 80 percent correlation. So, when you compare silver with gold, it works a little differently because the supply-demand ratio matters more for silver than for gold. Silver is more like a regular commodity. If the supply is less and the demand is more, automatically prices will rise," said Ravi Kumar TV, Founder of Gaining Ground Investment Services.

Factors fuelling the rally

The surge in inflows into silver funds is due to several factors such as increased industrial demand, safe-haven appeal, and geopolitical uncertainties. Also, silver is benefiting from its role as a hedge against inflation.

"Due to the recent surge in silver prices, it attracted retail investors and drove inflows into silver funds. Funds like silver ETFs and silver FOFs offer a convenient way to invest in silver without physical ownership, appealing to a wider range of investors. These factors collectively contribute to the increasing inflows into silver funds," said Satish Dondapati, vice president and fund manager, Kotak Mutual Fund.

Silver plays a dual role as both an industrial and precious metal, offering investors a unique opportunity for portfolio diversification.

“Its long-term growth outlook remains strong, driven by rising demand in key sectors such as renewable energy, electronics, telecommunications, and automotive. As the global push for sustainability accelerates, silver’s industrial relevance and investment appeal are set to grow steadily,” said Vishal Jain, CEO, Zerodha Fund House.

What should investors do?

Keep in mind that prices may fluctuate due to changes in global demand, geopolitical developments, and macroeconomic conditions.

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According to Nilesh D Naik, Head of Investment Products at Share.Market, silver prices have begun to rally recently, which has triggered increased interest among investors in silver funds.

“However, investors should understand that unlike gold, silver prices are also influenced by industrial demand, and therefore are more sensitive to economic cycles. Silver is also an extremely volatile commodity — its price volatility has often been more than twice that of gold,” Naik said.

While including gold or gold funds in a long-term portfolio makes sense for most investors, as a means of diversification and hedge against inflation, silver or silver funds are better suited for tactical allocations.

“It may be suitable for aggressive investors with a strong view on the future price movement of the metal. On the other hand, risk-averse investors would be better off avoiding silver funds in their portfolios," said Naik.

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Current prices of silver is at 13-year high and investing at these level’s presents both opportunities and risks.

"The current market environment, including rising geopolitical tensions, demand-supply constraint, increasing industrial demand and inflation concerns, might support the continued rise in silver prices in long term. At the same time one has to consider the inherent risks of volatility in silver prices and interest rate sensitivity. Adopting a diversified investment approach and considering long-term trends can help manage these risks effectively," said Dondapati.