 "A young woman tries oxidised jewellery at a shop in Ahmedabad. India, the world's largest consumer of silver, uses the metal in silverware, jewellery, coins, and bars. File image/AFP")
They say all that glitters is gold. But ahead of the festive season in India, it seems all that glitters could be silver also. The price of the white metal has surged to record highs and there’s even a shortage of silver, causing panic.
Interestingly, the silver shortage isn’t restricted to India alone. And as a result of this squeeze, several mutual fund houses in India temporarily suspended fresh investments in their respective Silver ETF Fund of Funds.
So, what’s going on? Why is there a silver shortage? And what are the effects owing to this shortage?
Where’s the silver at?
On Tuesday, news reports emerged that there was a shortage of silver, as global silver demand has outstripped supply for the past four years, using up the surplus produced in the previous five years.
Anant Jatia, chief investment officer at Greenland Investment Management, was quoted as telling Bloomberg, “I have seen nothing like it ever. What we are seeing in silver is entirely unprecedented. There is no liquidity available currently.”
In London, concerns arose over the lack of liquidity, sparking a worldwide hunt for silver, with benchmark prices soaring to near-unprecedented levels. Internationally, spot silver climbed as much as 3.1 per cent to near $52 an ounce, exceeding last week’s peak. And in India, silver prices hovered close to the Rs 1.8 lakh per one kilogramme, a new all-time peak.
When asked about the prices of silver and the shortage, a note from Goldman Sachs said the silver market “is less liquid and roughly nine times smaller than gold’s, amplifying price moves.
For those who are unaware, London has been the heart of precious metals trading for over a century, setting global benchmark prices through a few banks holding gold and silver in city vaults.
But what’s fuelling this silver shortage?
Globally, London relies on hundreds of millions of silver in the vaults for liquidity. However, this stockpile is draining and mine production isn’t able to match the demand. As per an Economic Times report, London silver inventories have fallen by a third since mid-2021; the remaining freely tradable silver is down to 200 million ounces, 75 per cent lower than mid-2019.
There’s also been an explosive demand for silver in recent times with investors across the world turning to the white metal as confidence in fiat currencies wanes and inflation expectations rise.
Additionally, the US last month included silver in a draft US critical minerals list. The idea was “to secure the minerals needed to drive the US economy and protect national security”, the department’s US Geological Survey (USGS) said in a statement at the time.
According to Dr Renisha Chainani, head of research at Augmont – Gold for All, silver has become precious as a result of its strong safe-haven demand and ongoing supply bottlenecks. “Geopolitical uncertainty and global monetary easing are also fuelling silver’s rise. Political instability in the US, France, and Japan has added to safe-haven buying, while the London market is facing a shortage of readily available physical silver,” she was quoted as telling India Today.
According to Vandana Bharti, assistant vice president at SMC Global Securities, the shortage of silver can also be attributed to the metal being recognised as a “strategic metal”. Central banks worldwide have begun buying silver — both in physical and ETF form — alongside gold. The US recently classified silver as a “critical mineral,” which has made countries and companies rush to secure their supplies.
India is the world’s largest consumer of silver, using it in jewellery, coins, bars, and even industrial applications from solar energy to electronics. However, India imports nearly 80 per cent of silver to meet its needs. A Reuters report reveals that in the first eight months of 2025, silver imports fell 42 per cent to 3,302 tonnes, while investment demand, soared to record levels. This surge absorbed the surplus imported in 2024, creating a shortage that now needs to be met through additional overseas shipments.
But to ship silver internationally at present also poses a problem. That’s because of the global shortage as well as the lease rates, which is the cost of borrowing physical silver. Currently that rate has risen by 30 per cent.
How are other countries dealing with the silver shortage?
The shortage has made it nearly impossible for manufacturers to produce silverware, while coins and bars — popular festive gifts — are trading at steep premiums.
Moreover, investors are of the opinion that the price of silver will further rise. Goldman Sachs analysts wrote that it’s likely silver prices will continue to rise during the US government shutdown. As a result of this, few are willing to sell silver, making supplies even tighter.
What has been the impact of this silver shortage?
Owing to the shortage of silver, jewellers across India are struggling to meet demand ahead of Diwali, when buyers tend to purchase silver. Moreover, some jewellers are now asking customers to pay the price prevailing on the date of delivery, which could take anything upward of 10 to 20 days, given the sharp increase in demand.
But that’s not the only issue.
On Tuesday (October 15), several mutual fund houses such as Kotak, SBI, Tata, and UTI MF have stopped accepting fresh investments in Silver ETF Fund of Funds (FoFs). For those who don’t know, a silver ETF is a fund that is traded on stock exchanges, like a regular stock, and tracks the market price of silver.
Tata Mutual Fund even said, “Due to prevailing market conditions and shortage of physical silver in the domestic market, silver is trading at a premium relative to international prices. The premium directly impacts the valuation of the scheme,” Tata Mutual Fund said in its addendum.
Even SBI Mutual Fund’s issued a notice dated October 13, stating that the decision follows a sharp surge in demand for silver in recent weeks, “driven by global macroeconomic factors and increased investor interest in commodities.”
The mutual fund houses noted that their move comes to prevent investors from buying silver at significantly inflated prices. Fund managers are of the opinion that if an investor puts his/her money in a silver ETF, it would be highly overvalued and poses the risk of an immediate and sharp loss when the premium eventually normalises.
The lack of availability of silver in the physical form also makes it difficult for fund houses to create new ETF units.
We will have to wait and see if the market finds a balance — or faces another bout of panic buying, and it will depend on how quickly new supply can reach the vaults.
With inputs from agencies