Copyright © HT Digital Streams Limited All rights reserved. Ram Sahgal 3 min read Oct 16, 2025, 9:20 am. IST Traders warn that the ongoing silver pressure – driven by ETF and coin demand – may ease after Diwali. Summary Rising investment demand has drawn new investors into silver at record prices – but analysts warn that the post-Diwali rally could simmer as inventories improve and prices correct. The silver squeeze, which began last week amid rising investment demand for silver exchange-traded funds (ETFs) and physical bars and coins, may begin easing after Diwali, trade officials said. They warned that this could hurt investors who had recently entered the white metal counter with high hopes. Diwali festivities last from October 18 to 23. Currently, domestic silver futures are trading at a 7–8% discount to spot prices, reflecting an inverted market – where spot trading is higher than futures rather than the other way around. This anomaly could reverse when stocks rally, potentially causing sharp losses for investors who entered the market this month, lured by quick gains, analysts said. 84% rise so far Traders have warned investors of an unfavorable risk-reward ratio, with silver already returning a solid 84% so far this year. The first half of this month alone accounted for 11.5% of the total rise—from ₹87,578 per kilo in January to ₹1,61,400 as of 17:40 IST Wednesday, according to the MCX front-month or active silver contract, which trades between 09:00 and 23:30 on the country’s largest derivatives and energy exchanges. “There is no shortage in the international market for silver,” said Shekhar Bhandari, president of Kotak Mahindra Bank. “I expect the logistics to ease towards the end of October and the repayment in silver to reverse as the temporary supply crunch eases.” Trump tariffs stall spur demand September, at 15.9%, holds the distinction of generating the highest monthly return for any month this year, but October looks likely to surpass it unless the supply crunch eases. Although supply has lagged demand this year, a massive crunch emerged last week amid increased safe-haven purchases linked to Trump tariffs and the prolonged shutdown of the US federal government, said Gnanasekar Thiagarajan, director of commodities research firm Commtrendz. This rush pushed up silver ETF premiums and prompted several mutual funds – including Kotak MF, Tata MF and SBI MF – to temporarily halt fresh investments in their silver ETF Fund of Funds due to abnormally high premiums. ETFs trading at hefty premiums For example, Kotak Mutual Fund, which suspended new subscriptions to its silver Fund of Funds last week, saw its silver ETF price rise 10.7% to ₹168 last Thursday, even as spot prices traded at ₹159 per gram — implying a 6% premium over the common fund’s 100 bpst, to ₹168. AMC. Apart from ETFs, the most noticeable impact of the shortage is seen between active silver futures on MCX and spot prices. While futures traded at ₹1,61,400 on Thursday, the spot price closed at ₹1,74,000 per kilo. This means the futures are trading at a 7.8% discount to the spot price, an abnormality seen during times of severe crunch in the physical market. “The discount reflects the supply crunch, which could reverse when silver inventory starts flooding the domestic market. This will shrink premiums and lead to losses for new investors who have just entered the counter,” warned Thiagarajan. Once supply improves, futures could trade again at a premium to the spot market, analysts said. Chirag Sheth, principal consultant (South Asia) for Metals Focus, a precious metals research consultancy, said investors jumping in at current prices on expectations of huge returns as seen YTD could be in for a “huge disappointment”. He estimates that silver will break out at $57 an ounce next year, compared to $52 levels currently. Bhandari of Kotak Mahindra Bank agreed on moderate returns going forward but declined to specify a level. Silver, like gold, has rallied this year amid rising investment demand and global economic uncertainty linked to Trump tariffs. Investment demand in India between January and September stood at 2,256 tonnes—out of total demand of 7,040 tonnes over the same period, according to Metals Focus. This compares with 1,859 tonnes of investment demand during all of 2024, when total demand was 7,072 tonnes. Against total demand of 7040 tonnes, the estimated silver inventory in the nine months of the current calendar was 5305 tonnes, per Metals Focus. Get all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download the Mint News app to get daily market updates. more topics #Silver #termynhandel #MCX #donald trump Read next story
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