The past few weeks have witnessed one of the most turbulent phases for precious metals in recent history. What began as a strong, conviction-led rally in gold and silver quickly spiraled into speculative frenzy, particularly in silver, before an abrupt and sharp reversal triggered a selloff that wiped out gains and laid bare fragile liquidity conditions. Silver Exchange-Traded Funds (ETFs) mirrored this extreme volatility, experiencing dramatic swings alongside the underlying metal.
Silver Prices Stage Strong Rebound on MCX
In a significant turnaround, silver prices on the Multi Commodity Exchange (MCX) rebounded sharply by 6% in intra-day trading today. This extends gains from the previous session, as value buying emerged following a steep correction that had dragged prices down by more than 46% from peak levels within just three trading sessions. Gold, too, continued its recovery trajectory, indicating a broader precious metals bounce.
On MCX, silver jumped 6% to reach an intraday high of ₹2,84,094 per kilogram. Simultaneously, MCX gold rose 3% to ₹1,58,420 per 10 grams. In the ETF space, the recovery was even more pronounced, with silver ETFs rallying up to 9% intraday. Notable performers included SBI Silver ETF, Zerodha Silver ETF, Nippon India Silver ETF, and Kotak Silver ETF, each gaining over 8%.
Market Sentiment Boosted by Trade Announcement
This recovery phase was partly catalyzed by the recent India–US trade announcement made by US President Donald Trump, which injected improved sentiment into the markets. However, investors remain vigilant, closely tracking broader macroeconomic factors. These include ongoing geopolitical tensions, currency movement fluctuations, and evolving expectations surrounding the leadership and policy direction of the US Federal Reserve.
Key Questions Answered for Silver ETF Investors
What is a Silver ETF?
A Silver ETF is an exchange-traded fund designed to track the price of physical silver. It provides investors with a convenient method to gain exposure to silver's price movements without the logistical challenges of physically storing or insuring the metal. Units of a Silver ETF trade on stock exchanges like shares, and their value reflects the prevailing silver prices, minus a small management expense ratio.
How to Select Which Silver ETFs to Invest In?
Siddharth Srivastava, Head of ETF Product & Fund Manager at Mirae Asset Investment Managers (India), offers crucial guidance. "In selecting Silver ETFs, primary importance should be given to liquidity on the exchange and a lower expense ratio," he explains. "Additional filters for consideration may include the fund's tracking error and its overall efficiency in accurately tracking the underlying silver price on the exchange."
Why Short-Term Return Comparisons Can Be Misleading?
Srivastava cautions investors against over-reliance on short-term performance metrics. Comparing returns over brief periods often misguides investors into making reactive, emotional decisions rather than focusing on the long-term fitment within their portfolio and understanding the inherent behavior of the asset class.
Why Do Silver ETFs Behave Differently During Sharp Corrections?
He further elaborates on the nature of silver's volatility. Historically, silver exhibits greater price volatility compared to gold. This is attributed to its smaller overall asset base and higher levels of speculative participation. These factors can amplify corrections significantly when market participants rapidly unwind their positions.
What Do Investors Often Misread When Prices Fall?
Srivastava adds a critical note on investor psychology during downturns. Sharp price corrections should neither be automatically treated as guaranteed buying opportunities nor as triggers for panic selling. Both approaches are flawed without proper due diligence and a clear understanding of how the asset fits into the broader context of one's investment portfolio.
Silver Technical Outlook and Market Mechanics
The recent sharp fall in silver was not merely a sentiment-driven event. It was also exacerbated by forced liquidations triggered by rising collateral requirements following margin hikes by exchanges.
NS Ramaswamy, Head of Commodity & CRM at Ventura, provides technical perspective. "Silver is likely to remain range-bound around $72 to $78," he states. "A decisive breakout above the $80 level will be a key indicator identifying a sustained recovery. The severe damage inflicted on silver prices was majorly on account of higher collateral requirements. Hiking the margins forced traders to liquidate their positions, which accelerated the price drop."
Looking at the longer-term horizon, Ramaswamy suggests that sustained higher prices could potentially reshape supply-demand fundamentals. This could help address the eroding deficit that had initially fuelled silver's impressive rally earlier.
Disclaimer: The views and recommendations presented above are those of individual analysts or broking companies, and not of Mint. Investors are strongly advised to consult with certified financial experts before making any investment decisions.
