Silver has been in gold‘s shadow.
In times of macroeconomic uncertainty and risk-aversion, investors turn to the yellow metal whenever they seek safety. In contrast, silver is considered highly volatile, industrial, and cyclical.
But this perception has begun to change over the past year.
During the last 5 years (ending 12 October 2025), silver has given 157% returns, rising from Rs 62,625 to Rs 161,133 at a 14-year high.
And in the last one year, it has given a 78% return, surpassing gold’s return of around 55%.
Silver – 1 Year
Source: MCX
The rally has sparked renewed interest among investors, prompting a closer look at what’s driving silver’s strength and whether the momentum can be sustained.
The Changing Narrative Around Silver
Traditionally, Silver’s price has been linked to both economic expansion and inflation trends.
In times of strong industrial growth, silver benefits from rising demand from industries. And, in high inflation and geopolitical uncertainty (like the current one), investors turn to it as a store of value, similar to gold.
This dual identity—part industrial metal and part precious metal—makes silver unique.
It outperforms gold in the early stages of the economic upcycle, when industrial demand picks up, and underperforms when growth slows.
What’s Driving the Rally?
Three major factors stand out behind silver’s run-up: Industrial demand growth, supply constraints, and a supportive macro backdrop.
Robust Supply and Demand Fundamentals
Industrial demand for silver has reached record levels amid persistent supply shortages, causing demand to outstrip supply. According to the World Silver Survey (2025), the silver market was undersupplied for the fourth consecutive year in 2024, by 148.9 million ounces (Moz).
This structural shift has been ongoing since 2021, and it’s not ending anytime soon. The market is projected to be undersupplied for the fifth consecutive year in 2025, by 117.6 Moz. This continued deficit is fueling the silver price to a record high.
Record Industrial Demand
In 2024, silver production rose by 0.9% to 819.7 Moz. Of this, industrial demand alone reached a record high of 680.5 Moz in 2024, underpinning overall demand. The green economy, technology, and inventory depletion have primarily driven this rise.
Historical Silver Supply and Demand
Silver’s use in photovoltaics (PV), electric vehicles (EVs), and grid infrastructure development has driven demand. For instance, China is increasingly deploying n-type solar cells that use higher amounts of silver.
Drivers of Industrial Demand
In addition, applications linked to artificial intelligence (AI) have contributed to the growth in consumer electronics shipments. This sustained demand is leading to the rapid depletion of silver inventory, which declined sharply from 22 months of supply (in December 2020) to just 13 months by December 2023.
Silver is also finding support from a favorable macroeconomic and geopolitical environment.
Supportive Macroeconomic and Geopolitical Backdrop
Expectations that the US Federal Reserve (Fed) would start cutting policy rates were a principal driver, particularly following the first rate cut in September 2024.
Uncertain macroeconomic conditions, higher US trade deficits, ballooning US debt and expectations for further US rate cuts later in 2025 are also leading to sustained investor interest. This is because, like gold, silver is a non-yielding asset. It doesn’t pay interest, dividends, or coupons.
Therefore, when interest rates are high, investors can earn better returns from other assets (such as fixed deposits, government bonds).
However, when interest rates fall, the opportunity cost of holding both metals decreases.
Furthermore, lower interest rates weaken the US dollar. Since silver and gold are priced in dollars, a weaker dollar makes them cheaper for foreign buyers, boosting global demand.
The Growing Popularity of Silver ETPs in India
Investing in silver through exchange-traded products (ETPs), including ETFs, has become easier, fueling this rally. Silver ETPs saw an inflow in 2024, after two years of outflows. Much of this was driven by India, which saw a 195% increase in holdings last year.
Holdings surged by around 25 Moz in 2024 to a record high of 38.6 Moz in January 2025. To put this into context, the inflow in 2024 was equivalent to 42% of India’s annual retail investment.
In just 3 years since the Silver ETPs was first launched in India in January 2022, India’s share in the global ETF market has grown to over 4%.
Indian Silver ETP Holdings
This growth is primarily driven by Fund of Funds (FOFs), as investors currently lack efficient alternative investment options for silver, increasing the attractiveness of silver ETFs.
Catching Up to Gold
Silver is also benefiting from its strong correlation with gold and its positioning as an undervalued asset relative to the yellow metal.
The silver-to-gold ratio, a widely used relative valuation indicator, helps investors gauge whether silver is undervalued or overvalued against gold.
A higher ratio (85-90) means silver is cheaper than gold. A low ratio (40-50) implies silver is expensive than gold. Historically, the long-term average ratio hovered around 60-65.
According to DSP Netra, the gold-silver ratio was 85 in September 2025, from 90 in March, while it averaged 85 in 2024.
Historical Gold-to-Silver Ratio
This represents that silver is undervalued compared to gold, meaning silver has more upside potential.
During a bullish market, silver, being a high-beta metal, tends to outperform gold due to its smaller, less liquid market and higher price volatility.
Gold has broken several records, while silver has just surpassed its 2011 high, generating significant speculative interest in the hope that silver will eventually regain its lost ground.
Silver ETFs: A Convenient Way to Invest in Silver
Investing in physical silver can be costly and cumbersome due to making charges, storage, and taxes, and you may not receive full value on sale. Silver ETFs provide a simpler alternative, allowing investors to gain exposure to silver price movements without worrying about purity, storage, or insurance.
Broadly, investors have two choices. Investors have two main choices: Silver ETFs, which trade on the stock exchange like shares and require a demat account, and Silver Fund-of-Funds (FoFs), which invest in silver ETFs but can be bought like a regular mutual fund and allow Systematic Investment Plans (SIPs).
Both options offer liquidity, with units redeemable at any time. From a tax perspective, if you hold a silver ETF for more than 12 months (and up to 24 months in the case of silver ETF (FOF), it will be treated as long-term capital gain and will be taxed at the rate of 12.5%.
If you hold it for less than 12 months (and 24 months), it’s taxed at slab rates.
Overall, both Silver ETFs and FoFs combine the appeal of silver investment with the convenience, transparency, and flexibility of mutual funds. They also allow investors to participate in growing industrial demand in sectors like electrification, green energy, and technology.
Here are four silver ETFs suitable for investors seeking to incorporate silver into their investment strategy.
Silver ETFs Based on the Last 5 Years Return
Data as of 12 October 2025
Returns over 1 year are compounded annualized.
Standard Deviation indicates the risk, while the Sharpe ratio and Sortino ratios measure the Risk-Adjusted Return.
They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
The category average of all midcap mutual funds is considered.
Please note that returns here are historical returns.
*The top funds here in the table are based on past returns over 3-year returns. The list of schemes is not exhaustive.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommended.
Speak to your investment advisor for further assistance before investing.
Source: ACE MF
#1 Axis Silver FoF
Axis Silver FoF is an open-ended FoF scheme launched on 21 September 2022. The scheme tracks the returns generated by the Axis Silver ETF. The scheme’s asset under management (AUM) stood at Rs 3.59 billion (bn) as of 30 September 2025.
This scheme invests a minimum of 95% of its AUM in units of the Axis Silver ETF, and the remaining amount is invested in debt and money market instruments.
Current asset allocation is 99.21% in the Axis Silver ETF and 0.78% in debt, cash, and other current assets. This plan is suitable for investors looking for a limited investment horizon for diversification.
The scheme is small in size and has an expense ratio of 0.16% (direct plan), making it affordable. The tracking error of Axis Silver ETF is 6.81%, which means that the tracking error of Axis Silver FOF is at a similar level.
Over the last 3 years, the scheme has given a return of 33.93% Compound Annual Growth Rate (CAGR), outperforming the category average of 23.09%.
Its volatility is lower, with a standard deviation (SD) of 20.56, lower than the category average (21.97). However, it underperforms the category (0.59) in risk-adjusted returns, with a Sharpe ratio of 0.37. A Sortino ratio of 0.9, against category (1.36), also suggests that the scheme lags in downside protection.
#2 Adity Birla Silver ETF FoF
This scheme was launched on 2 February 2022 and has an AUM of Rs 5.32 bn. It is an open-ended scheme that invests in units of the Aditya Birla Silver ETF.
This scheme invests in physical silver of 99.9% purity. It’s a little costly, with a total expense ratio of 0.30%. It allocates 95-100% of AUM to units of the Silver ETF, and the remaining to cash and debt.
Aditya Birla Sun Life Silver ETF leads in tracking error with 0.51% in the regular plan, making it a good proxy of silver returns. Yet, over the last 3 years, this FoF has delivered a CAGR of 19.6%, underperforming the category average of 23.09%.
With a standard deviation of 20.67, the scheme has lower volatility than the category (21.97). But it lags the category (0.59) in risk-adjusted returns, with a Sharpe ratio of 0.36. Its Sortino ratio of 0.91, against category (1.36), suggests that the scheme also lags in downside protection.
#3 ICICI Prudential Silver ETF FoF
This scheme was launched on 1 February 2022 and has an AUM of Rs 32.32 bn, making it the most liquid silver FoF.
It invests in units of the ICICI Prudential Silver ETF. It’s also cheapest, with a total expense ratio of 0.12%. The scheme’s current allocation is 99.07% in the units of the ICICI Prudential Silver ETF.
This ETF, which FOF tracks, has a tracking error of 0.53%, closely following the price of silver. Over the past 3 years, this FoF has delivered a return at a CAGR of 19.51%, underperforming the category average of 23.09%.
With a standard deviation of 20.73, the scheme has lower volatility than the category (21.97). But its Sharpe ratio of 0.36, lower than the category (0.59) suggests, it lags in risk-adjusted returns. The scheme also lags in downside protection, as can be seen from the Sortino ratio of 0.87 against the category (1.36).
#4 Nippon India Silver ETF FoF
This scheme was launched on 1 February 2022 and has an AUM of Rs 18.54 bn, making it the second most liquid silver FoF. It invests in units of the Nippon India Silver ETF.
Its total expense ratio is 0.27%. The scheme’s current allocation is 99.32% in the units of the Nippon India Silver ETF. The balance is held in debt, cash, and cash equivalents.
This ETF, which the FOF tracks, has a tracking error of 0.59%, closely following the price of silver. The scheme has delivered a return at a CAGR of 19.34% in the last 3 years, underperforming the category average of 23.09%.
With a standard deviation of 21.05, the scheme has lower volatility than the category (21.97). Its Sharpe ratio of 0.36, lower than the category (0.59) suggests, it lags in risk-adjusted returns. The scheme also lags in downside protection, as can be seen from the Sortino ratio of 0.88 against the category (1.36).
Key Considerations for Selecting Silver ETF FoF
- Investment Horizon: Due to its high volatility and drawdown, silver is suitable for long-term investments (5-10 years). This can help you weather market fluctuations and benefit from rising silver prices over the long term.
- Low Tracking Error: Tracking error measures how much a fund’s returns deviate from its benchmark (in this case, silver) from day to day. A low tracking error is preferred because it means it has a closer correlation with silver prices. Nowadays, Silver ETFs in India is trading at around a 10% (tracking error) premium to silver prices.
- Expense Ratio: Compare expense ratios of different silver funds. Lower expense ratios translate to higher returns for the investor.
- Long-performance Track Record: Do note that past performance does not guarantee future returns. It can, however, provide valuable insights into a fund’s consistency and risk profile.
- Suitability: Each asset class should be included in a portfolio based on its suitability. You need to determine why you want to invest in silver. Is it for capital appreciation, long-term exposure to silver due to rising industrial usage, or portfolio diversification? Understanding your goals will help you choose a silver FoF.
Conclusion
Silver’s resurgence marks a shift from being gold’s lesser cousin to a crucial metal bridging industry and investment. Its role in green energy, electronics, and technology gives it long-term structural support.
While short-term volatility persists, disciplined exposure through Silver ETFs or FoFs offers investors a balanced route to participate in its industrial and monetary appeal. It can also add meaningful diversification to long-term portfolios.
Happy investing.
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