Why Silver ETFs Are Trading Now A Days At A Premium, What Should Investors Do?

SILVER prices surged $50 mark on October 10, driven by strong demand during this Diwali festive season and domestic prices touching Rs 1.71 lakh per kilogram. This rally has attracted many new investors to silver exchange-traded funds (ETFs), even though these ETFs are trading at significant premiums over their NAVs.

Understanding the Premium in Silver ETFs

Some of the top silver ETFs on NSE, including SBI Silver, HDFC Silver, and Axis Silver moved up from 9–13% as of October 9, trading above their indicative NAVs.

This situation shows fear of missing out (FOMO) buying, with investors rushing into silver ETFs in spite of signs of short-term overheating in the spot market. Once physical silver supply squeezes through sharp price rallies, ETFs frequently trade at premiums due to temporary imbalance between demand and supply, not essentially long-term overvaluation.

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What Investors Should Consider

Replying to the increasing premiums, Kotak Mutual Fund temporarily put off lump-sum investments in its Kotak Silver ETF Fund of Fund on October 9. The objective of this move is to protect investors from incompetent pricing at existing premium levels. SIPs and redemptions will continue, and the fund will renew for lump-sum investments when premiums stabilize.

Kotak AMC continues a positive long-term outlook on silver, mentioning its importance in the global energy transition and as a hedge for market volatility.

Experts, therefore, advise investors to wait for premiums to ease or NAVs to realign before making an investment entry. Despite the fact that silver’s continuing fundamentals remain strong, timing entry is crucial in order to avoid overpaying.

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