Silver ETFs fired up by scarcity, festive season

Silver exchange traded funds or ETFs opened Thursday with a record 10-12% premium to spot prices, underscoring a scramble for the metal as festive buying, industrial use, and investor FOMO (fear of missing out) drove up demand against tight supplies.

- Ram Sahgal & Sashind Ningthoukhongjam

“Sales by multi-asset schemes of mutual funds later caused the premiums to narrow by the day end,” said Satish Dondapati, fund manager at Kotak Mahindra AMC, adding that when there is a supply shortage, silver ETFs typically trade at a 0.5-1% premium to spot prices.

The premiums, though, remained well above normal for the rest of the day. Notably, multi-asset schemes of mutual funds hold around 20% of their assets in gold and silver.

Fund managers said the elevated premium seen on Thursday is likely to persist in the short term as domestic bullion dealers from whom they source the metal had little to no stocks of silver. “In the past three to four days, we have seen a surge in silver demand,” said Vikram Dhawan, head of commodities and fund manager at Nippon India Mutual Fund, which runs the largest gold and silver ETFs in the country.