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Informist, Tuesday, Aug. 12, 2025

 

By J. Navya Sruthi

 

MUMBAI – Investors are preferring silver exchange traded funds over gold ETF as the white metal is likely to outperform gold, analysts said. Supported by rising industrial demand and continued supply deficit, the rally in silver prices is expected to continue in the short-term, leading to more inflows into silver ETFs.

 

In the domestic market, the price of silver is expected to rise to INR 130,000 per kilogram by Diwali, which is in October, said Ajay Kedia, director of Kedia Advisory. The fall in gold-silver ratio below 90 shows relative strength in the white metal, he added. Currently, the gold-silver ratio is 88. It was 89 in July. The ratio measures the ounces of silver required to buy an ounce of gold.

 

In 2024, supply of silver continued to be in deficit for the fourth straight year, with global supply lagging demand by about 149 million ounces, according to reports. The shortfall is expected to continue in 2025 because of expanding industrial consumption and constrained mining and recycling capacity, analysts said.

 

Rising industrial application of silver led to an increase in inflows into silver exchange traded funds in July than in gold ETF. According to data released Monday by the Association of Mutual Funds in India, net inflows in 15 silver ETFs were at INR 19.04 billion, compared to INR 12.56 billion in gold ETFs.

 

However, on a monthly basis, net inflows into both gold and silver ETF reduced due to rise in volatility, analysts said. Net inflows into 21 gold ETFs fell significantly by 40% on month and 6% on year to INR 12.56 billion and net inflows into 15 silver funds declined by 5% on month to INR 19.04 billion in July, the data showed. On a yearly basis, net inflows into silver ETFs were up a whopping 155%. According to the association, Motilal Oswal launched a new gold ETF scheme in July, taking the total number of gold ETF to 21 from 20 in June.

  

"Net inflows (into gold ETFs) were positive though reduced compared to the previous month -- this could be due to a wide variety of reasons including partial profit booking as gold prices stalled near $3,400 (per ounce on the COMEX) for a while," said Sandip Raichura, executive director and chief executive officer for retail broking and distribution at Prabhudas Lilladher Pvt. Ltd.

 

Meanwhile, the 5% month-on-month fall in net inflows in silver ETFs was due to profit booking after silver prices on the Multi Commodity Exchange of India rose to a new all-time high in July, Kedia said. On Jul. 23, the most-active September silver contract on MCX rose almost 1% to a new all-time high of INR 116,641 per kg.

 

Despite a fall in net inflows, the assets under management of gold ETF rose in July due to "positive mark-to-market" said Venkat Chalasani, chief executive of the association. The assets under management of gold ETF rose over 4% on month to INR 676.35 billion as of Jul. 31. Inflows in ETF of the precious metals usually rises in times of volatility, and "since we are expecting short-term volatility, the trend will continue the way it has happened in the last few months," Chalasani added.

 

The assets under management of silver ETF rose over 13% on month and 195% on year to INR 229.63 billion in July. The number of folios in gold ETF rose to 7.9 million as of Jul. 31 from 7.7 million a month ago. The folios in silver ETF rose to 1.0 million in July from 910,253 a month earlier.

 

RETURNS: GOLD vs SILVER

Kedia said gold is unlikely to give a double-digit return henceforth and added that inflows into gold ETFs are likely to decline the next couple of months. However, Raichura said gold is on a longer term bull run and prices are seen volatile in the short term.

 

Return on silver is seen at 12-15% compared to a single digit return on gold, Kedia said. "We believe silver, which has been in a large supply deficit for the last four years, will increasingly be in focus as Asian and European markets make bolder moves towards clean tech, electrify new infrastructure...," Raichura said.

 

In July, gold contracts traded on MCX gave a return of nearly 1%, against a negative return of 1% in June. In the Jan-Jul period, gold gave a return of 30%, compared to a return of nearly 9% in the year-ago period. Historically, gold in dollar terms has not really been able to sustain gains beyond 30% and with no immediate trigger for gold prices to rise back to the all-time high, gold prices would consolidate, limiting the flows into gold ETFs, analysts said.

 

On the other hand, silver on the MCX gave a return of 3.8% in July, slightly less than 4% in June. So far in 2025, silver has given a return of 26%, compared to 11% in the year-ago period.

 

TOP FUNDS

In July, Tata Gold ETF gave the highest monthly return of 3.83%. Edelweiss Gold and Silver ETFs Fund of Funds – Direct Plan, Motilal Oswal Gold and Silver ETFs Fund of Funds – Direct Plan, ABSL Gold – Direct Plan, Quantun Gold Savins – Direct Plan, and UTI Gold ETF Fund of Funds – Direct Plan were among the top 10 in terms of returns, as per data from Value Research. On the other hand, Union Gold ETF Fund of Funds – Direct Plan gave the lowest return of 1.93%, data from Value Research showed.

 

Meanwhile, Kotak Silver ETF Fund of Fund – Direct Plan gave the highest monthly return of 4.59% in July. Tata Silver ETF Fund of Fund – Direct Plan, UTI Silver ETF Fund of Fund – Direct Plan, SBI Silver ETF Fund of Fund – Direct Plan, and Nippon India Silver ETF Fund of Fund – Direct Plan were among the top 10 in terms of returns, as per data from Value Research. UTI Silver ETF gave the lowest return of 3.12% in July, the data showed.  End

 

Edited by Ashish Shirke

 

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