Why Is Silver Rising and Should You Allocate to Silver ETFs

On the other hand, silver has gleamed of late. Since the end of April 2025, the price of silver has surged by good +12% as of June 11, 2025. The price per kg of silver today is Rs 1,05,507 and is just 0.80% away from its lifetime peak (as of June 11, 2025).

The key reason for the rise of silver is the increase in demand. Today silver is not just a precious metal holding cultural significance but also finds industrial application.

It is being used in electronic goods, solar panels, switches, electric vehicles (EVs), medical instruments, satellites, 5G technology, Internet of Things (IoTs), etc. In other words, it is an industrial commodity.

As per the World Silver Survey 2025 conducted by The Silver Institute, the industrial demand for silver rose 4% in 2024 to 681 million ounces (Moz), which was a record-high for the fourth consecutive year.

Going forward too, the demand for silver is likely to increase given the emphasis on clean energy, EVs, IoTs, semiconductors and so on.

The fortune of silver as an asset class will be closely linked to the outlook for the industrial world and the economy.

It is seen that usually when macroeconomic conditions are conducive and industrial growth is encouraging, it has worked in favour of silver. Simply put, silver has become a pro-cyclical commodity.

With major central banks around the world resorting to rate cuts to push growth, is also working in favour of silver.

Another reason for silver exhibiting gloss is the weak US dollar against major currencies, including the Indian rupee.

Investors also seemed to have been attracted by the undervaluation of silver compared to gold, when it was over the gold-silver ratio was over 100. It signalled that one could buy more grams of silver as against buying one gram of gold.

Those who invested in silver ETFs have also seen a good capital appreciation. Over a 1-year period silver ETFs, on average, have clocked +18.8% absolute returns, while the average compounded annualised growth rate (CAGR) over 2 years and 3 years has been decent +18.7% and +19.0%, respectively as of June 11, 2025.

[Read: Top 5 Silver Mutual Funds in India]

With inflows and the mark-to-market gains, the AUM of silver ETFs in India today has touched Rs 16,886 crore and there are over 8.37 lakh folios in silver ETFs as of May 2025, as per the AMFI data. This is quite significant, as only three-and-a-half years back, i.e. in November 2021, SEBI allowed Indian mutual fund houses to launch silver ETFs.

What Should Investors Do?

Even now while the gold-silver ratio has dipped to around 92, it is still higher than the long-term average of 81 - which means silver is still undervalued compared to gold.

The Silver Institute expects that at some point, silver will catch up with gold. In other words, silver potentially could offer good capital appreciation over the long term.

Having said that, silver is currently at a 13-year high. In the interim, silver could go through bouts of volatility. Instances of superior performance may not necessarily repeat or be sustained in the future.

Being a pro-cyclical commodity by nature, note that silver is much more volatile than gold (which is counter-cyclical.)

At present, the Trump 2.0 administration's protectionist policies, particularly on trade tariff tantrums, may influence how silver performs.

If steep reciprocal tariffs kick in after the 90-day hold period which ends on July 9, 2025, it could have ripples on the world economy.

If industrial demand also slows, particularly in sectors where silver is used, the price of silver could ease.

Keep in mind, when Trump earlier, in the first week of April, announced steep reciprocal tariffs on several countries, it did weigh down on silver.

However, if the US Federal Reserve and other major central banks across the world cut rates and turn accommodative to support economic growth, potentially it would bode well for silver.

As an investor, you need to have a longer horizon (of 8-10 years) when approaching silver and have a high-risk appetite.

It would be okay to have a tactical allocation of around 5-10% of your entire investment to silver ETFs for diversification and not go gung-ho.

Invest strategically and sensibly. Follow the best-suited asset allocation for you in 2025 and beyond.

Be thoughtful in your approach.

Happy Investing!

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.