Silver ETFs rally up to 188% in 1 year. Time to stay invested or cash out?

With silver prices scaling fresh record highs, commodity based ETFs tracking the metal have surged as much as 188% over the past year, an analysis by ETMutualFunds showed. Market experts caution that after such a sharp run up, fresh investments may not be ideal for long term return expectations. Long term investors can continue to stay invested, they say, but a more prudent approach would be to trim excess exposure and rebalance portfolios back to target allocations.

While sharing his personal approach of being extra cautious whenever there is excessive demand for anything, especially when Fear of Missing Out (FOMO) is a factor, Rajesh Minocha, a Certified Financial Planner (CFP) and Founder of Financial Radiance, told ETMutualFunds that the long term fundamentals for silver remain strong, but short term opportunities have diminished.

He further said, “After a nearly 200% increase in value, investing at current elevated prices is not advisable for such long term returns. Long term investors may remain in the market, but it is prudent to trim excess holdings and rebalance to target allocations.”

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Sagar Shinde, VP Research at Fisdom, shared with ETMutualFunds that at record highs, silver’s near term risk has clearly gone up, especially after a sharp rally, and investors with large gains may consider partial profit booking to rebalance portfolios.

That said, the broader case for silver remains intact due to structural supply tightness and sustained industrial demand, suggesting corrections, if any, may be shallow rather than trend ending, Shinde further said.

A report on silver from Neo Wealth Management recommends that investors should monitor exposure and potential volatility closely and pause silver allocations in core portfolios.According to a report by ETMarkets, silver prices surged sharply at the start of trade on Wednesday, hitting a fresh record high and stealing the spotlight in the bullion market. On the MCX, silver March futures opened over 2% higher, rising Rs 6,462 to trade at Rs 2,81,649 per kilogram, as bullish momentum continued amid global cues supporting precious metals.

Both experts list several factors that have driven silver prices to record highs over the past year. Shinde said that silver’s rally has been driven by a combination of strong industrial demand, notably from solar, EVs and electronics, persistent global supply deficits, and renewed investor interest amid geopolitical and macro uncertainty. “Unlike past rallies, this phase is supported more by fundamentals than speculative excess, with physical market tightness playing a key role,” he further said.

The report from Neo Wealth Management highlighted that in the first half of 2025 alone, around 95 million ounces flowed into silver backed ETFs and this marks the strongest investment inflow since the 2011 rally, but the underlying drivers are different.

Adding to this, Minocha shared three major factors that contributed to the rally. He said that firstly, rising industrial demand for silver, particularly in solar panels, electric vehicles and electronics, has strengthened the market and silver is now viewed as a valuable industrial material rather than just an alternative to gold.

Secondly, global geopolitical tensions and currency uncertainties led to increased demand for silver as a safe haven asset, and lastly, a supply shortage, combined with limited investment in mining and speculation, further accelerated price increases.

There were 21 silver based funds in the category, including ETFs and funds of funds. Among them, the Tata Silver ETF delivered the highest one year return of 188.48%, while the Tata Silver ETF FoF was the last in the return chart and gave 176.79% over the same period.

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A monthly note by the Association of Mutual Funds in India (AMFI) mentioned that silver ETFs drew notable investor interest, driven by strong industrial demand and an ongoing global supply deficit, resulting in inflow of Rs 3,962 crore, nearly 15% of the total flow into passive funds.

So, is this a phase where staggered investments make more sense than lump sum exposure, and after a near 200% return, is the risk reward still favourable for fresh investors?

Recommending staggered investments as more preferable compared to lump sum investments, Minocha said that while momentum remains strong, volatility is high and the risk reward ratio for new investors is now more balanced. Investing gradually or waiting for market corrections is advisable, and attempting to match past returns at this stage carries increased risk.

Sharing a similar opinion that staggered investment is a prudent approach compared to lump sum investment, Shinde said that while the long term structural story supports higher prices over time, near term risk reward for fresh investors is more balanced, making phased entry a better approach to manage drawdowns.

A report by Tata Mutual Fund highlighted that in 2025, post May, investors have turned bullish and have been aggressively buying silver. As such, silver prices have been rising to new highs to find a price where the market will be balanced by stockholders and investors.

Tata Mutual Fund further mentioned that global commodity markets have witnessed remarkable shifts, with silver leading the surge by soaring 161% year on year, outpacing not only traditional assets but also Bitcoin and the S&P 500. Platinum followed with an impressive 135% rise, while palladium climbed 72%, gold advanced 66%, and copper gained 44%.

Export restriction on silver

The Tata Mutual Fund silver report highlighted that China, the second largest silver miner, accounting for 60% to 70% of global supply, has announced new rules that will limit or halt the export of silver, tungsten and antimony by 2026 to 2027, citing environmental protection and natural resource preservation.

This policy requires Chinese companies to obtain licences to export silver and will allow only large, state approved firms that produce at least 80 tonnes of silver per year to qualify, preventing smaller exporters from shipping the metal.

As a result, the global silver deficit, currently at over 2,500 tonnes per year, could widen to over 5,000 tonnes, pushing prices sharply higher.

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Commenting on performance and the way ahead, Shinde said that silver has the potential to outperform many commodities in the near term due to its dual role as an industrial metal and an investment hedge.

“However, its higher volatility means returns may be uneven. The outlook remains constructive, but investors should be prepared for sharper swings compared to gold or other commodities,” he further said.

Believing that silver has the potential to outperform other commodities, particularly when industrial demand and speculative market sentiment are aligned, as they are now, Minocha cautioned investors to be prepared for sharp fluctuations. He said silver tends to be far more volatile than gold, the short term outlook is turbulent but positive, and it is better suited as a satellite allocation rather than a core portfolio holding.

One should always invest based on risk appetite, investment horizon and financial goals.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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