Why Silver ETF prices are more volatile than the NAVs

21 Jan 2026 , 02:54 PM

SILVER ETF – WHY THE SUDDEN RISE IN VOLATILITY

One of the big stories that stood out in the recent week was the extreme volatility in the prices of silver ETFs in the market. Consider the table below to grasp the point.

Silver ETFs	23-Jan	22-Jan	21-Jan	20-Jan	19-Jan	Volatility
Nippon Silver ETF	292.73	276.27	310.68	297.62	282.95	14.33%
ICICI Pru Silver ETF	306.55	288.14	322.00	313.75	295.00	13.71%
HDFC Silver ETF	294.07	279.54	311.68	302.71	282.71	13.46%
SBI Silver ETF	301.64	285.87	316.92	309.28	288.87	13.21%
Data Source: NSE / BSE

The last column on volatility shows how highly volatile the prices of silver ETFs have been as compared to the previous averages. The four biggest silver ETFs in India, accounting for 74% of the total AUM of silver ETFs, have seen sharp volatility with almost similar price patterns. For example, silver ETF prices have rallied on Tuesday and Wednesday, crashed on Thursday and rebounded on Friday. The pattern is similar, but let us spend a moment on ETF price.

When it comes to silver ETFs, there are 3 things to remember. Firstly, there is the underlying price of silver, which keeps fluctuating on a real time basis. The price of silver forms the basis of the silver ETF. The second is the silver ETF NAV. This NAV is updated daily based on the closing price of silver, adjusted for the total expense ratio (TER) charged daily. Finally, there is the ETF market price, at which you buy and sell in the market. That is captured in the above table and can be often volatile like stock prices.

DID INVESTORS GET CARRIED AWAY BY SILVER EUPHORIA?

Needless to say, silver has been one of the best performing asset classes in the last one year, giving returns that were nearly 3 times the returns on gold. Demand for silver is not just from people wanting to hoard precious metals, but also from several industries like electronics, defence, aerospace, renewable energy etc; where silver is extensively used. To understand the silver rally, here is a quick look at the performance of silver ETFs in India, with 1-year returns being the most relevant.

Silver ETF Scheme Name	Returns (%) 1-Year	Returns (%) 3-Year	Returns (%) Inception	Daily AUM (₹ in Crore)
Tata Silver Exchange Traded Fund	227.16	N.A.	101.37	5,925.45
ICICI Prudential Silver ETF	216.66	59.55	44.48	19,805.72
DSP Silver ETF	216.26	59.78	60.18	2,750.34
Aditya Birla Sun Life Silver ETF	216.01	59.65	47.36	3,999.32
Kotak Silver ETF	215.90	59.90	57.94	4,898.97
Mirae Asset Silver ETF	215.20	N.A.	67.77	1,051.93
Axis Silver ETF	215.16	59.79	63.36	2,402.94
Nippon India Silver ETF	214.96	60.25	46.82	40,028.91
SBI Silver ETF	214.81	N.A.	111.05	7,294.31
Edelweiss Silver ETF	214.51	N.A.	86.50	1,598.11
HDFC Silver ETF	213.38	59.21	64.39	9,080.11
UTI Silver Exchange Traded Fund	210.25	N.A.	N.A.	1,848.01
Data Source: AMFI

We have only presented silver ETFs with a minimum of 1 year in existence. The returns over 1 year tell an amazing story. All the funds here have given returns of more than 200% in the last 1 year. That is not surprising because silver prices have rallied globally more than 200% and in India there is the added benefit of rupee depreciation, which is also reflected in the prices of silver. But, let us now get back to the question of why the prices of silver ETFs crashed by 14-18% on Thursday, but the NAVs of these silver ETFs did not. More importantly, what is the cautionary note for silver ETF investors?

SILVER ETF INVESTORS – DON’T PAY FOR FROTH

Silver ETFs, being exchange traded funds are also traded on the stock exchange. However, there is a basic rule to remember. The price of the ETF must track the NAV of the silver ETF at all times. However, the disconnect arises because the NAV is announced only at the end of the day while the silver ETF prices are traded on a real time basis. Let us understand with an example.

Say, an Investor X is looking to buy silver ETFs. Silver is trading at ₹3,05,000 / KG, and the NAV of the silver ETF is at ₹302. Now during the day, if the price of silver goes up sharply, then the silver ETF price may go up to ₹320. If an investor gets carried away by the froth and decides to buy the silver ETF at ₹320, they may be disappointed because they have bought the silver ETF at a price that is a big premium to the price of silver and to the NAV.

But, why does the silver ETF price go into premium? It is largely about demand and supply. Today, due to the phenomenal returns on silver ETFs (as we have seen) in the last one year, there is a rush among small and medium-sized investors to buy into silver ETF. However, buying at these prices, they are not only paying a high price for silver, but also paying a premium, which may not be justified. That is what investors must be cautious about.

KEY TAKEAWAYS FOR INVESTORS IN SILVER ETFS

When buying silver ETFs, here is what investors must keep in mind.

• Avoid buying silver ETFs from a speculation point of view for short term profits. The idea of adding silver ETFs to your portfolio is to keep it to about 10% of your portfolio and provide a hedge when global geopolitics is volatile.
• Always check the gold-sliver ratio. Historically, the gold silver ratio has been in the range of 90 to 100. In the recent rally in silver, the gold-silver ratio is down to around 45. That is way off the averages and investors must be cautious in such conditions.
• Thirdly, when you buy silver ETFs in the market, check the silver ETF price and compare with the underlying price of silver and the last reported NAV. If the premium is too high, then you are just paying for froth and could get into problems later on.

The old story about investments still holds. If something is too good to be true, then it is probably not true. It is time for investor to be cautious!

 

Summary Silver ETFs have had a phenomenal run in the last one year and have been the best performing asset class. However, at higher levels, volatility is rising and investors often end up buying at elevated premiums. That is something best avoided. Investors must appreciate that, like any asset class, silver too goes through phases and cycles. Rallies will not last for ever, and after a 200% return in a year, it is better to err on the side of caution. Remember, price is what you pay; value is what you get!