‘Your silver ETF is not tracking silver’: Wealth manager warns investors as premiums skyrocket amid record rally

Silver prices hit a historic milestone on October 9, breaching the $50 per ounce mark for the first time since 1980, triggering a wave of retail interest and frenzied trading in silver exchange-traded funds (ETFs). The rally, driven by a 74% year-to-date surge, has pushed ETFs to trade at hefty premiums — raising concerns that investors are paying far more than the actual value of silver.

According to market data, Nippon India’s Silver ETF, the largest in India, closed at Rs 156, nearly 5.5% higher than its indicative net asset value (iNAV) of Rs 148.3. Other ETFs from HDFC MF, UTI MF, and Tata MF also traded at double-digit premiums, reflecting a demand-supply imbalance.

Fund managers attribute this distortion to limited physical supply — each ETF unit must be backed by actual silver, which is bulky, difficult to transport, and constrained by global shortages. But Wealth Manager Alok Jain of Weekend Investing has issued a stark warning to retail investors: “Your silver ETF is not tracking silver.”

In a recent video on YouTube, Jain dissected what he called “a dangerous disconnect” between ETF prices and real silver values. “Investors assume they’re buying digital silver, but in many cases, they’re paying 15–20% more than what silver is worth in the market,” he said. “This isn’t just a tracking error — it’s a systemic failure.”

Jain demonstrated that while MCX silver futures and international spot prices were moving largely in sync, Indian silver ETFs had diverged sharply. “One ETF rose 1.7%, another 8%, and yet another over 10% on the same day. That’s absurd. These are supposed to mirror the same asset,” he said, calling the variation “a red flag for retail investors.”

Explaining the issue, Jain noted that a commodity ETF should accurately reflect the underlying metal’s performance. “When you buy a silver ETF, the AMC collects money and purchases physical silver stored in vaults. Each unit represents fractional ownership of that silver. If silver rises 5%, your ETF should too — not 15%.”

He added that Indicative Net Asset Value (iNAV), updated every few seconds during trading, is meant to guide buyers on the fair price of an ETF. “But many investors ignore iNAV. They see rising prices and chase momentum, unaware they’re paying inflated premiums that could vanish overnight.”

Jain urged SEBI to impose tighter regulations on ETFs. “Just like stocks have circuit limits, ETFs should have a ±2% band around NAV. The regulator should mandate frequent NAV updates and tighter spreads from authorized participants,” he said, adding that market makers are failing to keep ETF prices aligned with their underlying value.

He also compared the situation to global markets, where silver ETFs trade within a 1% margin of spot prices. “In India, we’re seeing 15–20% premiums — that’s unacceptable. Investors could lose a fifth of their capital instantly if prices normalize.”

The surge has created a divide between early investors — who are enjoying windfall gains — and new entrants who risk overpaying. “If you bought last month, you’re lucky,” Jain warned. “If you buy now, you might be walking into a trap.”

As silver continues its record-breaking run, the message for investors is clear: don’t buy blindly. Check iNAV, compare prices, and understand what you’re really paying for — because, as Jain cautions, “Not every silver ETF is truly tracking silver.”