Nippon Silver ETF, other silver ETFs slide up to 4% as silver prices tumble. Here’s why

Silver exchange-traded funds (ETFs) tumbled up to 4% on Friday as silver prices dropped following the Indian government issuing permits to import 6,500 metric tons of silver over the next six months.

Nippon India Silver ETF, which is widely tracked by investors looking for exposure to precious metals, dropped 4% to trade at Rs 182 apiece. Tata Silver ETF, Angel One Silver ETF, Mirae Asset Silver ETF, Motilal Oswal Silver ETF, Groww Silver ETF, ICICI Prudential Silver ETF and others also dropped around 4% each.

This came as silver prices dropped. Silver futures with December, March and May expiries fell around 3% each to trade at Rs 1,93,940 per kilogram, Rs 1,99,985 per kg and Rs 2,04,513 per kg.


Also read | 6,500 metric tons incoming in next six months: India opens festive floodgates for silver

Why are silver prices falling today?

The Indian government issued the permits for 6,500 metric tons of silver imports over the next six months as the world's biggest consumer of the precious metal aims to meet ‌festive-season demand, Reuters reported. India’s higher imports, which rely on international purchases to meet more than 80% of its silver demand, could support global prices while easing hefty domestic premiums that have risen due to tight supplies.

India had restricted ⁠imports of silver in nearly all forms with immediate effect in mid-May. In June, it further tightened the rules by adding silver grain and powder to the restricted category and requiring prior import authorisation.

Bullion dealers who received the permits told Reuters that the approvals would allow the world's largest silver consumer to meet demand during the likely oncoming sale-season rush. Chirag Thakkar, chief executive of leading silver importer Amrapali Group Gujarat, told Reuters that the permitted volume appeared substantially higher than India's likely requirements over the next six months. He said he expected the additional supply to help lower domestic premiums.

The scale of the latest import allocation caught market participants by surprise, dealers said, given the weakness in demand for silver jewellery and investment amid falling prices.

Meanwhile, investors are now expecting a tough Federal Reserve stance next week, higher bond yields and a steady dollar, which have raised the opportunity cost of holding non-yielding bullion, said Rajeev Sharan, Head of Research, Brickwork Ratings. “Gold is now caught between global conflict fears and high interest rates, while silver is taking a bigger hit as elevated borrowing costs also weigh on industrial demand,” he said.

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