Silver ETFs cool: Is this the time to invest in the white metal?

Kolkata: Silver prices have made headlines consistently this year, thanks to a few distinct reasons. The rush to buy silver was so relentless that it pushed the white metal close to the hitherto unimaginable price level of Rs 2 lakh a kg in cities such as New Delhi, Kolkata, Mumbai, Chennai and Hyderabad. The price level just before Dhanteras 2024 was about Rs 97,900 a kg.

But softening prices and declining demand after the festive spurt has trimmed the price a bit. The market seems to be stabilising after the correction. Let's see whether it creates a new entry point for investors. Data show that between October 9 and 14, silver prices rose in the global markets to touch $50 per ounce. In the domestic market, frantic buying by investors -- perhaps driven by FOMO (fear of missing out) -- elevated silver ETF prices well above their net asset value (NAV).

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The rise in demand stretched valuations to such as extent that major AMCs such as Tata, Kotak, SBI, UTI, HDFC, ICICI Prudential and Aditya Birla Sun Life were compelled to announce a temporary suspension of new investments in Silver ETF Funds of Funds. After the rise, the correction happened. Silver prices fell due to easing global trade tensions and a consequent decline in safe-haven demand. The price of the white metal fell by more than 6% in the US market on October 17. In the domestic market, silver prices declined from Rs 1,71,275 to Rs 1,60,100 per kg.

Overheating disappears

By October 20, normalcy was seen returning to the markets and silver ETF prices came down. For example, the closing price of Nippon India Silver ETF was Rs 160.6, a level that was 0.7% below its NAV (net asset value). Data show that many silver ETFs are abouot 10% below their 52-week high levels.

Return of some Silver ETFs in the past one week

360 ONE Silver ETF: -6.93%

Aditya Birla Sun Life Silver ETF: -7.08%

Axis Silver ETF: -7.06%

DSP Silver ETF: -7.02%

Edelweiss Silver ETF: -7.05%

Groww Silver ETF: -7.04%

HDFC Silver ETF: -7.05%

Aditya Birla Silver ETF FoF (Direct): -9.61%

Axis Silver FoF (Direct): -11.38%

DSP Silver ETF FoF (Direct): -10.71%

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Can one invest now?

The trading of ETFs below their NAVs indicates that the over-heating phase is gone. However, all experts have said that silver has a bright outlook in the long term. The white metal has three major constituents of demand -- one, from those who buy silver jewellery, silverware and figurines; two, those who buy th emtal for safe-haven demand and three, a rising demand from expanding industrial sectors like renewable energy and elecgttric vehicles. Silver prices may reach $75 per ounce by 2026 in the global markets and Rs 2,40,000 per kg in India, mentioned Motilal Oswal Financial Services report “Silver 2030 – The Unprecedented Rise”.