Silver has soared to a historic high of US$52.5868 per ounce due to a historic short squeeze in London and strong demand for safe-haven assets amid global economic uncertainty, eclipsing the previous record set during the notorious Hunt brothers’ corner attempt in 1980. Spot silver crossed US$51 per ounce for the first time as investors sought refuge in safe-haven assets amid mounting fiscal and monetary concerns. The extraordinary rally—driven by a short squeeze in London, safe-haven demand, geopolitical tensions, and tight liquidity—has pushed silver prices up by over 70% year-to-date globally, and by 79% over the past year in India. In a rare coordinated move to protect retail investors from entering at inflated levels, five mutual fund houses in India have temporarily suspended fresh lump-sum investments in their silver ETF fund-of-fund (FoF) offerings.
In India, silver prices have jumped by 32%, rising from Rs124,413 per kilogram on 8th September to Rs164,500 in line with international trends. The metal’s growing importance in green energy technologies, combined with a chronic supply deficit, has ushered in unparalleled market conditions. The supply shortfall relative to demand is estimated at 20%, and that gap is expected to persist, driven by continued demand from the solar and wind sectors.
What has made this rally especially acute is the sharp physical shortage of silver in India, which has pushed domestic prices to abnormal premiums of 10%–12% above international import parity, compared with a more typical premium of around 0.5%. As the world’s largest silver consumer, India has seen premiums over official domestic prices climb as much as 10% owing to strong investment demand ahead of major festivals and constrained supplies.
Tata Mutual Fund announced that from 14th October, it would suspend purchases, switch-ins, fresh systematic investment plans (SIPs) and fresh systematic transfer plans (STPs) into its Tata Silver ETF FoF. The fund house says this step was necessitated by prevailing conditions and silver’s domestic premium, which adversely affects the scheme’s valuation. It clarified that existing SIPs and STPs would remain operative and that purchase and switch-in transactions submitted before 3pm on 13 October 2025 would still be processed. During the suspension, redemptions, switch-outs and systematic withdrawal plans would continue as usual. Tata emphasised the suspension is temporary and valid only until further notice.
Kotak Mutual Fund acted earlier, on 10 October 2025, suspending fresh lump-sum and switch-in investments into its Kotak Silver ETF FoF. Kotak MF says it had acted in the best interests of investors and would restore subscriptions once premiums normalised. The fund noted that the domestic premium had risen from 0.51% on 4th September to 5.7% by 9 October 2025, a more than tenfold jump within a month. It added that SIPs and STPs would continue unaffected. Kotak expects to resume normal operations within a few weeks as supply improves after Diwali, though the shortage may last through October.
SBI Mutual Fund announced the suspension of all fresh subscriptions via lump sums and switch-ins into its SBI Silver ETF FoF, effective 13 October 2025. The move responded to the limited availability of physical silver, which constrained the creation of new units at the indicative NAV (iNAV). SBI assured investors that SIPs, STPs and other systematic plans would continue seamlessly.
On the same day, UTI Asset Management Company followed suit, halting fresh lump-sum investments and switch-ins to its Silver ETF FoF to guard against pricing distortions caused by physical scarcity. ICICI Prudential Mutual Fund was the latest to act, from 14 October 2025 suspending new subscriptions (lump-sum, switch-ins and systematic) to its Silver ETF FoF. Like the others, it confirmed that existing SIPs and STPs would remain unaffected.
All five fund houses restricted only fresh lump-sum or switch-in subscriptions, while existing systematic plans remain unaffected. This measured approach balances the need to shield investors from overpaying at inflated premiums without disrupting those who are accumulating via disciplined intervals.
This coordinated suspension highlights the severity of the dislocation. Fund houses must purchase physical silver at sharply inflated domestic spot prices to back new ETF units. When silver commands premiums as high as 10%–12% above international price, new subscriptions come at a steep overvaluation, risking immediate losses when premiums normalise.
The crisis has been worsened by extraordinary developments in the global silver market. In London, extreme liquidity constraints have forced traders to air-freight physical silver bars across the Atlantic—a measure more commonly seen with gold during periods of stress. Silver has now appreciated over 70% in 2025, surpassing gold, supported by supply tightness and sharply higher borrowing costs in the London market.
It is important for investors to distinguish between Silver ETFs and Silver ETF FoFs. A Silver ETF is traded on stock exchanges like a stock and tracks the price of silver. Most Silver ETFs are physically backed, meaning the fund acquires and stores high-purity silver bars on behalf of investors. Each share represents a fractional claim on that physical silver. By contrast, a Silver ETF FoF is a scheme that invests in the ETF itself—a structure popular among investors who prefer simple access without dealing with a demat account, or who prefer to invest via SIPs.
Because mutual fund houses control subscriptions to their FoF offerings but have no control over ETF trades on the stock exchange, they cannot curtail trading of the ETF itself. Thus, despite suspensions at the fund-of-funds level, Silver ETFs continue to trade freely, often at substantial premiums to iNAV and the underlying silver price.
All five fund houses emphasised that redemptions, switch-outs and withdrawal plans remain fully functional during this period, ensuring that investors who wish to exit may do so unimpeded. The suspensions specifically target incoming money at potentially stretched price levels, rather than restricting existing investors.
The decisions by mutual fund houses like Tata, Kotak, SBI, UTI and ICICI Prudential reflect a prudent, investor-centric approach in this volatile environment—prioritising protection over short-term inflows even as markets gyrate.
Financial commentators urge caution. While silver has strong long-term fundamentals—driven by its critical role in solar panels, electric vehicles and broader green energy—current valuations may reflect froth in the short term. The recent three-month rally of 49% has moved prices into territory where fresh lump-sum entries carry heightened risk. The suspension of new subscriptions may prevent retail investors from entering at peaks and suffering losses if premiums revert.
Meanwhile, Spot silver rose as much as 0.4% to US$52.58 an ounce in London. Gold prices also touched new record levels, marking eight consecutive weeks of gains, as investors flocked to precious metals amid rising geopolitical tensions and growing expectations of US interest rate cuts. The surge in silver has been fuelled by tightening liquidity in the London market, sparking a global rush to secure the metal.
Prices in London are currently trading at a rare premium to New York, prompting traders to airlift silver bars across the Atlantic — a costly measure usually seen only with gold — to take advantage of the price difference. The premium stood at around US$1.55 an ounce on Tuesday, down from US$3 last week, but lease rates for silver in London have jumped above 30% for one-month contracts, making it prohibitively expensive for traders to hold short positions. The shortage has been intensified by strong Indian demand in recent weeks, which has drained available supply after earlier shipments were redirected to New York amid concerns over potential US tariffs.
This episode provides a stark illustration of how commodity markets can become distorted under extreme pressure. The coordinated action by these five fund houses demonstrates a responsible application of fiduciary duty, aimed at safeguarding investors in turbulent times, even if it temporarily restricts their access to new investments.