Bought silver ETFs this festive season? Here’s the twist no one saw coming

Investors who poured money into gold and silver during the festive season are facing immediate losses, with silver ETF buyers taking the heaviest hit. Prices have slumped sharply after an aggressive rally, exposing those who entered at elevated levels to near double-digit drawdowns.

Since peaking on 14 October, domestic spot 999 silver has dropped 15% to ₹152,501 per kg as of 22 October, data from the Indian Bullion and Jewellers Association (IBJA) shows. But the real pain is visible in silver ETFs, which were trading at steep premiums during the festive surge. Nippon Silver Bees and ICICI Prudential Silver ETF—India’s largest silver funds—have plunged 17% and 16% respectively.

Gold hasn't been spared either. Spot 995 gold has fallen 1.7% to ₹123,411 per 10g, while Nippon Gold Bees ETF has declined 2.3%, as of 21 October. Market closures on 22 October prevented updated ETF pricing.

The recent sell-off follows a mammoth rally driven not by retail enthusiasm but by institutional demand from central banks and sovereign investors reallocating away from dollar-based assets. These entities tend to hold long-term positions, which can limit extreme corrections, but do little to protect short-term ETF investors who entered during peak euphoria.

Globally, gold has lost 7.9% from its all-time high of $4,356 per ounce on 20 October to $4,025, following a statement by U.S. President Donald Trump suggesting progress on a trade deal with China—dampening safe-haven demand.

Silver ETFs have suffered disproportionately due to the massive premiums they commanded just weeks ago. On 10 October, futures were trading 10% below spot silver due to tight delivery stocks. That discount has narrowed to around 3%, indicating easing supply concerns and reducing arbitrage opportunities.

While long-term demand for silver—particularly from the renewable energy sector—remains strong, analysts caution that near-term volatility is likely to stay high. Factors like weaker Chinese manufacturing, a stronger U.S. dollar, or cuts in green energy spending could all weigh on sentiment.

Investors are being urged to avoid lump-sum exposure and instead consider staggered investments or SIP-style entries into gold and silver ETFs to manage risk. A seasonal dip in prices following Dhanteras is not unusual, but the magnitude of the recent fall has left many overexposed.

With year-end trading volumes thinning and liquidity tightening, even small market moves could trigger large price swings—especially in ETFs. Those holding recent positions are now grappling with timing risk and premium decay, with little room for quick recovery.