Gold ETF or Silver ETF? Which precious metal exchange-traded funds are worth investing in now - Expert answers

Speaking on the outlook for precious metal ETFs, Srivastava said silver has been in deficit for the last four to five years, with demand coming from photovoltaic cells and electric vehicle applications. However, he said there has been no sudden new industrial application to justify the recent sharp rally in prices.

“Silver has been in deficit for the last four to five years. Photovoltaic cells and EV applications have been around for many years. There is no sudden new industrial application that has emerged,” he said.

He noted that the recent rise in silver prices was not entirely supported by fundamentals. “We did not see silver move from $30 to $120 purely because of the deficit. The parabolic rise at the end was largely speculative. Investors were chasing returns. At one point, the rally did not look justified,” Srivastava said.

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Gold Preferred On Risk-Reward Basis

From a risk-reward perspective, he said gold appears relatively more stable at current levels. “If I compare gold and silver today, from a risk-reward point of view, I would prefer gold. For silver, I would wait for some more time to see a clear trend,” he said.

Srivastava said he would monitor silver prices over the next three to four weeks before taking a view. “I would like to see where silver trends over the next month. From here, I can see a possibility of $10–$15 downside,” he said.

Volatility And Timing Risks In Silver

He cautioned that silver is a thinly traded asset and prone to sharp volatility. “Because it is thinly traded, we often see 20–30 per cent moves very quickly. Even now, it is trading lower. Corrections can be sharp,” he said.

He also highlighted timing risks for domestic investors. “A lot of the correction happens when Indian markets are closed, so it is not always easy to exit positions immediately. Traders need to understand that corrections can be very sharp,” he said.

Referring to the recent spike in domestic silver prices, he said, “When silver touched around Rs 4.20 lakh per kg, it was during a weekday. Many physical holders did not get a timely opportunity to sell.”

On the extent of possible downside, he indicated that a sharp correction in silver could be around 20 per cent.

ETF Performance And Investor Flows

Market data showed mixed movement across commodity and index-linked ETFs during the session. Silver ETFs such as Nippon India Silver ETF, HDFC Silver ETF, ICICI Prudential Silver ETF and SBI Silver ETF declined around 6–7 per cent, despite delivering strong one-year returns of over 160 per cent. Tata Silver Exchange Traded Fund also fell more than 6 per cent.

Gold ETFs were relatively stable in comparison. Nippon India ETF Gold BeES, Tata Gold Exchange Traded Fund and ICICI Prudential Gold ETF declined around 1–2 per cent during the session, while maintaining one-year gains of nearly 80 per cent.

Despite the recent decline in gold and silver prices, investor flows into precious metal ETFs remained strong. According to data released by the Association of Mutual Funds in India, gold ETFs recorded net inflows of Rs 24,040 crore in January, more than double from Rs 11,647 crore in December.

For the first time, inflows into gold ETFs marginally surpassed those into equity mutual funds, which saw investments of Rs 24,028.6 crore during the month.

Silver ETFs also witnessed healthy inflows. They recorded net inflows of Rs 9,463 crore in January. Assets under management of silver ETFs stood at around Rs 1.25 lakh crore.

Gold & Silver Futures Prices Today

Silver 5 March futures were trading at Rs 2,41,198.00, up Rs 4,763.00 or 2.01 per cent from the previous close of Rs 2,36,435.00. The contract opened at Rs 2,39,626.00 and touched an intraday low of Rs 2,39,602.00 and a high of Rs 2,43,699.00. Its 52-week range stands between Rs 1,09,741.00 and Rs 4,20,048.00.

Gold 2 April futures were trading at Rs 1,53,749.00, up Rs 913.00 or 0.60 per cent from the previous close of Rs 1,52,836.00. The contract opened at Rs 1,53,750.00 and hit a low of Rs 1,53,368.00 and a high of Rs 1,54,837.00 during the session. Its 52-week range is between Rs 1,01,107.00 and Rs 1,93,096.00.