India silver ETFs trade at steep premium amid festive demand

New Delhi, Oct 11 India’s silver exchange‑traded funds (ETFs) are trading at steep premiums over international benchmarks amidst surging festive demand and constrained physical global supply, a report said on Saturday.

Investment inflows into silver products hit record levels globally in H1‑2025, adding about 95 million ounces – exceeding the total inflows of the entire previous year, the report from Axis Mutual Fund said.

Further, it pushed total ETF holdings to roughly 1.13 billion ounces (worth over $40 billion) by mid-2025, Axis Mutual Fund said.

Global mining output has grown only modestly and is expected to peak by 2026, even as industrial and investment demand climbs, driven by solar photovoltaics, electric vehicles, electronics, 5G infrastructure, and semiconductors.

Recent purchases by Saudi Arabia’s central bank have highlighted further central banks' interest in silver, amplifying the demand shock.

Meanwhile, physical demand in India has been exceptionally strong due to festive demand, with buyers snapping up silver – coins, bars, jewellery, and idols – amidst imports doubling in September on-year, as bullion dealers and jewellers scrambled to secure inventory despite record-high price, the report said.

That shortage has flowed through to ETFs, which are trading at premiums of about 5–12 per cent over converted LBMA prices inclusive of customs and GST, Axis MF said.

Under normal conditions, any gap between Indian and global prices would be small and arbitraged away. But in the current scenario, with physical silver scarce, the premium persisted, and even ETF arbitrageurs could not immediately bridge the difference, the fund house noted.

Axis MF warned that the inflated entry price risks a near-term NAV correction if supply normalises and the domestic premium evaporates. For medium‑ to long‑term investors, silver is increasingly viewed as a strategic diversifier and hedge, and short‑term price distortions may be less relevant for multi‑year horizons, the fund house said.

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