Silver is stealing the show; what should you do?

Silver Is Stealing the Show

• Silver reached record highs; ETFs surged 188-222% in a year, sparking investor debate.
• Experts advise rebalancing silver ETF holdings, not panic profit-booking
• Silver ETFs are better as portfolio diversifiers, not core investments due to volatility.

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Silver has been in the spotlight of late, with prices hitting record highs and silver ETFs (exchange-traded funds) delivering eye-catching returns.

For many retail investors, such sharp moves trigger a familiar dilemma: is it time to jump in, book profits, or simply stay put?

While silver’s long-term demand story remains strong, driven by clean energy and industrial use, its sudden price surge also raises the risk of entering at the wrong time. This is where having a clear strategy matters more than chasing returns or reacting to market noise.

On the MCX, the white metal hit a record high of Rs 3,35,500 per kg at 12 pm on January 21. Silver traded near its record high, at $93.79 an ounce, in the international market early morning, representing a 0.89 percent decline from its previous close.

Time to rebalance

Silver ETFs are up 188-222 percent in 12 months. Historical patterns show 15-25 percent corrections follow such runs before resuming the uptrend.

“Silver ETF holders should prioritise rebalancing over panic profit-booking, guided by rule-based triggers rather than emotional price action,” says Vinay Rajani, Senior Technical & Derivative Analyst at HDFC Securities.

Investors may evaluate their investment goals and return expectations. “Investors may look to rebalance the portfolio with partial booking in silver ETF by considering the gold/silver ratio, which is nearing the 50 mark after touching 100 in year 2025,” says Tapan Patel, Fund Manager-Commodities, Tata Asset Management.

Gold-to-silver ratio measures how many ounces of silver equal the price of one ounce of gold. Last year, the ratio was around 87. Over the last 30 years, the median of gold and silver has been around 67.

Silver ETFs should be best viewed primarily as a portfolio diversifier. The metal should never be considered as a core investment. Silver is both a precious metal and an industrial commodity, which puts it in a unique position. However, due to its dual nature, it is comparatively more volatile than gold.

“We believe that commodities (gold and silver) should certainly form a part of an investor’s portfolio, and its allocation should be around 10-15 percent of the overall portfolio. An important point to note here is that when we talk about gold or silver, we are referring to gold and silver ETFs as a financial instrument and not the physical gold or silver that the investor might have in the form of jewellery or ornaments,” says Hardaman Singh Seth, Head Business—ETF, Mirae Asset Investment Managers (India).

Overall, silver remains a structurally important metal with long-term demand drivers, especially from energy transition and industrial applications. “However, since silver has shot up quite dramatically recently, any exposure, incremental or fresh, should be taken strictly as per one’s asset allocation criteria,” says Seth.

Why timing matters for silver ETF investors

Since silver ETFs are physically backed, tight supply conditions increase the cost of acquiring physical silver. This directly impacts the fund’s NAV (net asset value) and can dilute overall investor returns. In extreme cases, elevated premiums and supply constraints may also make the procurement of physical silver challenging, further adding to tracking inefficiencies.

“Silver is a commodity asset class whose prices are highly dependent on demand-supply factors. Any sudden shift in demand or supply may trigger high price fluctuations,” says Patel.

The recent premium-to-indicative net asset value (iNAV) episode highlighted the risks associated with buying silver ETFs during periods of exceptionally high demand. “In October last year, the domestic physical silver market experienced a severe supply squeeze, which led to record-high physical premiums and a significant divergence between futures prices and physical market prices,” says Rajani.

While NAV is calculated once daily after market close, showing the official per-unit value. iNAV updates continuously during trading, reflecting real-time ETF holdings, helping investors spot premiums or discounts instantly.

“Investors entering silver ETFs during high-demand phases face the risk of paying inflated prices, which can negatively affect NAV performance and subsequent returns, once market conditions normalise,” says Rajani.

The situation has eased since last year’s supply squeeze. Physical silver availability is better, reducing premiums and tracking inefficiencies, so investors now face a lower risk of paying inflated prices.