Why Are Silver ETFs Trading at a Premium of up to 18% in India?
About the Sudden Spike in Silver ETF Prices
Silver Exchange Traded Funds (ETFs) have seen a sudden surge, with some funds trading at a premium of up to 18% compared to their intrinsic Net Asset Value (NAV). Experts suggest that the imbalance between the demand for ETF units and the availability of physical silver has distorted prices.
According to market experts, the current mismatch stems from the scarcity of physical silver required to create new ETF units. Normally, the market maker buys silver in physical form, exchanges it with the Asset Management Company (AMC) for ETF units, and sells those in the market. However, due to tight global supply, this mechanism is currently strained.
As a result, there are fewer sellers in the market while retail demand continues to climb, pushing ETF prices well above their fair value. This situation may persist until physical silver supply normalizes.
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What Experts Are Saying
Another financial expert, shared data showing that multiple Silver ETFs—like those from Nippon, HDFC, and UTI—were trading significantly above NAV, reflecting a clear supply constraint. The premiums ranged between 10% and 18%, far beyond normal spreads.
| AMC | Symbol | LTP (₹) | Premium % to NAV |
| Nippon | SILVERBEES | 160.49 | 9.9% |
| ICICI Prudential | SILVERIET | 165.22 | 12.6% |
| Tata | TATSILV | 16.89 | 18.0% |
| HDFC | HDFCSILVER | 165.94 | 13.2% |
| UTI | SILVERETF | 169.57 | 11.0% |
Investors are advised not to chase momentum-based moves in commodity ETFs, especially when market inefficiencies drive premiums. Buying at inflated NAVs can result in immediate mark-to-market losses when normal pricing resumes.
The silver market globally has been tight due to rising demand from electronics, solar panel manufacturing, and green technology sectors. Physical delivery constraints have created a bottleneck, magnified by speculative trading and low liquidity in Indian silver ETFs.
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Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that while ETF premiums highlight market enthusiasm, they can also trap short-term buyers. He advises waiting for spreads to narrow before accumulating Silver ETFs. which is a SEBI Registered Advisory Services. Khera has warned investors to exercise caution. He explains that when physical silver is scarce, market makers cannot issue new ETF units, causing the listed price to shoot up abnormally. Such distortions, he adds, rarely sustain for long and usually correct swiftly once arbitrage opportunities open. Read more insightful market perspectives at Indian-Share-Tips.com,
Related Queries
What happens when physical silver shortages impact ETF pricing?
How should retail investors navigate volatility in commodity ETFs?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
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