Silver ETFs Spark Frenzy As Prices Soar 9% Even As Metal Futures Slip — Here's Why

Investors in the Nippon India Silver ETF woke up to a shock on Thursday morning as the fund surged nearly 9% in just an hour, even while the underlying metal's price fell. The sudden disconnect has exposed a key vulnerability in one of India's hottest investment themes of 2025, raising concerns over liquidity mismatches in a market where thousands of crores are now at play.

Silver BeES touched an all-time high NAV of Rs 165 per unit, up over 9%, even as MCX Silver December futures declined 0.75% to Rs 1,48,738 per kg, a divergence that left traders scrambling for explanations. Here's the reason why:

ETFs, or exchange-traded funds, are designed to mirror the price of the underlying asset, in this case, silver. However, unlike mutual funds, ETF prices are dictated by demand and supply in the market. When investor optimism runs high, ETFs can trade at a premium to their Net Asset Value (NAV), and when sentiment sours, they can fall sharply below it.

The rush to buy silver ETFs on Thursday followed silver's record-breaking performance the previous day, when December futures settled at Rs 1,49,855 per kg, a 2.79% jump, after briefly breaching the Rs 1.5 lakh mark.

The anomaly comes amid an extraordinary year for silver investors. The metal has soared nearly 90% in 2025, driven by strong industrial demand and constrained supply. Globally, silver hit the $50 psychological mark on Thursday, with Comex Silver up about 70% year-to-date and MCX Silver up roughly 71%.

According to Swapnil Aggarwal, director of VSRK Capital, the price mismatch between silver ETFs and futures has two main causes. "The ETF market closes around 3:30 p.m., while MCX futures trade till around 11:30 p.m. There's an eight-hour gap, and if silver jumps overnight, ETFs need to catch up in the morning. That's why you often see higher openings," he explained.

Aggarwal added that investors often prefer ETFs over futures for their perceived safety, creating a demand-driven premium. "The demand for ETFs is stronger because people see them as safer than the more volatile futures market. Strong industrial demand, US interest rate trends, and silver’s industrial applications are also driving ETF buying," he said.

His advice to investors: hold on. "Silver could reach around Rs 2,50,000 by the end of 2026. Those already invested should continue to hold for the next year, while new investors can consider buying on dips."

Santosh Meena, head of research at Swastika Investmart, pointed out that this decoupling of ETF prices from their NAV has become a curious pattern in India's silver market. "Silver ETFs like Nippon India and ICICI Prudential are trading at notable premiums. This is driven by low trading volumes and extremely bullish sentiment," he said.

While this premium might look like a windfall, Meena warned it could backfire. "It's a temporary anomaly that arbitrageurs will eventually correct. Once the bullish momentum cools, ETF prices will align with their NAV, and investors who bought at a premium may face losses," he noted.

Still, both analysts agree the long-term outlook for silver remains strong. With record-high industrial demand from sectors like electronics, solar energy, and electric vehicles, silver's role in the green economy is expanding rapidly. "Short-term volatility aside, the fundamentals remain solid," Meena said. "Long-term investors shouldn't worry about temporary premiums or price swings."