Silver ETF Frenzy Cools Down: Understanding the Reversal
The frenzy around silver exchange-traded funds (ETFs) appears to be cooling, with most funds trading at a discount over the last two sessions. This marks an end to the hot-air premiums at which the silver ETFs traded in the preceding five sessions, rising by 5-10% each, as the precious metal’s demand soared amid a global shortage.
Silver ETFs started surging after Oct. 9, when global silver rates crossed $40 an ounce after the London Bullion Market Association pointed towards a shortage in physical silver. Starting Friday, a reversal of this trend could be seen, as the ease in global supply has led to the tapering in global rates. The metal, on that day, slipped 6% during the trading in US spot market. India’s Multi Commodity Exchange mirrored the decline, where December futures had slumped 10% in intraday trade.
Impact on Prominent Silver ETFs
Among prominent exchange-traded funds, ICICI Prudential Silver ETF was trading 7.34% lower at Rs 153.68 at 4:44 pm, whereas Nippon India Silver ETF was trading 7.33% lower at Rs 148.82. Both slipped below their indicative-net asset value. Similarly, SBI Silver ETF was trading 7.74% lower at Rs 151.8 at 4:55 pm, well beneath its i-NAV.
Till the past week, several mutual funds were halting fresh inflows into their silver fund-of-funds, amid the sharp squeeze in physical silver supply. The supply, which began easing on Friday, led to a sharp decline in the metal’s rate in the spot market. At the start of the week marking the onset of Diwali, silver was trading 6% lower at Rs 1,59,615 per kg.
Current Market Scenario
At the time of publishing this article, the silver rate in US spot market stood at $51.79 an ounce, down 0.22% as against the previous day’s close. On India’s Multi Commodity Exchange, silver futures for December delivery were trading 1.3% lower at Rs 1,54,671 per kilogram.
Silver prices are likely to fall further, as the global market is now seeing a supply glut instead of a squeeze, according to Kumar Jain, national spokesperson for the India Bullion and Jewellers Association (IBJA). The London Bullion Market Association (LBMA) has released additional quantities into the market, leading to a sudden price drop worldwide.
‘Silver sales have cooled off now. We don’t see much demand after Dhanteras, and prices are expected to fall further,’ Jain said. This shift in the market dynamics suggests that the silver ETF investing frenzy may be over for now, and investors should be cautious about their investment decisions.
Investment Strategies for Silver ETFs
For investors looking to invest in silver ETFs, it’s crucial to understand the current market trends and the factors influencing silver prices. Given the recent cool-off in the silver ETF market, investors should consider their investment goals and risk tolerance before making any decisions.
It’s also essential to keep an eye on the global market trends, including the global economy and the geopolitical tensions, which can impact the demand and supply of silver. By staying informed and adapting to the changing market conditions, investors can make informed decisions about their silver ETF investments.
Conclusion
In conclusion, the recent reversal in the silver ETF trends is a significant development for Indian investors. As the market dynamics continue to evolve, it’s crucial for investors to stay informed and adapt to the changing conditions. By understanding the factors influencing silver prices and the silver ETF trends, investors can make informed decisions about their investments and navigate the complex world of Indian stock market investments.
