After months of continuous bullishness and aggressive buying by investors, silver is now losing its shine. After a rapid rise of about 65-70% in a year, silver exchange traded funds i.e. Silver ETFs saw a sharp fall on 20th October i.e. the day of Diwali. The reason for this is that due to improvement in physical supply, its prices have softened at the global level. Let us tell you that in the beginning of October this month, the spot price of silver crossed $40 per ounce. Then the demand for silver has intensified on the possibility of physical shortage of silver. With this, silver crossed $50 by mid-October.
However, at the end of last week, due to easing of trade tensions and slowdown in demand for safe-haven assets, the rise of silver took a break. On October 17, silver prices in America fell by more than 6%, which also affected the Indian market. According to the Indian Bullion and Jewelers Association (IBJA), on October 20, silver prices in India fell by about 7% from ₹ 1,71,275 to ₹ 1,60,100. This fall also affected silver ETFs, which move up and down depending on domestic prices.
Silver ETFs fell by 7.5% in a single day
Silver ETFs fell sharply in a single day, with most funds losing up to 7% on October 20, according to data from Ace MF. ICICI Prudential Silver ETF fell 6.96% and Axis Silver ETF fell 6.93%. Nippon India Silver ETF (SilverBees), the country’s largest and most traded silver ETF, also fell 6.94% in a single day. Other large funds also declined, indicating a broad-based decline.
Now getting it at the right price?
Amidst the bullish trend of silver, Silver ETFs were trading at a huge premium over iNAV (Intra-Net Asset Value) till some time ago but now due to huge fall in prices this premium has been eliminated which is a sign of normalization of the market. At the same time, just two weeks ago, due to heavy investment and limited liquidity, Silver ETF had gone at a premium of 10-13% over INAV, which means investors were paying more for it.
According to data available on NSE, Nippon Silverseeds is at ₹148.79 and INAV at ₹152, ICICI Prudential Silver ETF is at ₹153.68 and INAV is ₹164.79 and Axis Silver ETF is at ₹154.62 and INAV ₹163.99. This means that the ETFs are trading at a discount to their fair value, which is an important indicator of slowdown in silver demand. Let us tell you that when there was no fair value, many mutual funds like Kotak Mutual Fund, SBI Mutual Fund, UTI Mutual Fund, Groww Mutual Fund, Tata Mutual Fund, ICICI Prudential Mutual Fund, Aditya Birla Sun Life Mutual Fund and HDFC Mutual Fund. Had stopped transactions in its silver ETF fund of funds.
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