Since hitting its 14 October high, domestic spot 999 silver has fallen 15% to ₹152,501 per kg on 22 October, according to the Indian Bullion and Jewellers Association (IBJA).
Silver exchange-traded funds (EFTs) have suffered more because they were trading at a higher premium. The two biggest silver ETFS by assets, Nippon Silver Bees and ICICI Prudential Silver ETF, have fallen 17% and 16%, respectively, since 14 October.
While Spot 995 gold has fallen 1.7% ₹123,411 per 10g during the period, Nippon Gold Bees ETF has declined 2.3%. EFT prices have been calculated till 21 October as the markets were closed on 22 October.
“Most of the gold buying is being driven by institutional players such as central banks, which are diversifying away from US dollar assets and are typically long-term investors,” said Naveen Mathur, Director, Currency and Commodities, Anand Rathi Wealth. “The rally isn’t merely fuelled by retail participation, where the sell-off is triggered when some profit-booking is seen. As a result, the correction in gold prices is unlikely to be very sharp.”
Gold has gained 62% and silver has surged 77% year to date amid global uncertainty, tariff wars and diversification away from the dollar. The share of gold in India’s own forex reserves has risen to 13.1% as of June from 9.6% a year earlier, Mint had reported.
However, international gold prices have dropped 7.9% from their all-time high of $,4356 per ounce on 20 October to $4,025 per ounce after American President Donald Trump’s statement signalling a ‘fair’ trade deal with China.
Meanwhile, from 10 October, silver ETFs traded at a very high premium over spot silver prices due to increased festive and industrial demand. This elevated premium was on account of lower stocks of silver for physical delivery. However, supply concerns appear to be easing, causing prices to drop. Investors who got into silver ETFs during this time have seen higher losses than those who might have bought the physical metal.
The discount between silver futures and spot prices has narrowed to around 3% as of 22 October from 10% on 10 October, when futures were trading well below spot due to supply shortages, according to the Multi-Commodity Exchange and IBJA.
“While near-term volatility remains elevated for silver, long-term fundamentals are still positive,” said Vikram Dhawan, head of commodities and fund manager at Nippon India Mutual Fund. “Investors with a medium- to long-term horizon may consider silver as part of a diversified portfolio, preferably through staggered allocations, while staying mindful of global growth and policy risks.”
Satish Dondapati, fund manager at Kotak Asset Management Co., suggested a systematic investment plan (SIP) or a systematic transfer plan (STP) from liquid funds into gold or silver ETFs from a long-term perspective, despite the anticipated short-term volatility.
There could be some correction in gold ahead, but it is not expected to nose-dive, say experts.
“The post-Dhanteras correction in gold prices is an annual phenomenon,” said Rajesh Rokde, chairman of the All India Gems and Jewellery Council (GJC). “Prices typically dip slightly after Dhanteras, but demand picks up again as the festive season resumes following the five days of Diwali.”
Dhawan sees silver consolidating in the near term as markets adjust to recent volatility and seasonal liquidity trends.
Liquidity typically thins out toward year-end as trading slows during the November–December holiday period. Investors need to be watchful as market depth declines during holidays, and price swings can remain sharp even on smaller volumes, he said.
Silver’s prices are also linked to industrial demand, especially from the renewable energy industry, as the highly conductive metal is used in solar panels.
Dhawan said a slowdown in US renewable-energy spending, any prolonged weakness in China’s manufacturing activity, or a stronger US dollar and higher real yields could all weigh on silver sentiment.
Manav Modi, precious metal research analyst at Motilal Oswal Financial Services, expects gold to be in a range-bound level in the near term at ₹1,25,000- ₹1,30,000 per 10g.
