Silver Investment in Mutual Funds Lags Behind Gold
Silver has gained popularity in India's financial markets this year, with silver ETF inflows rising by 139% month-on-month in January. The total category assets jumped to Rs 1.16 trillion (tn), while MCX silver futures touched Rs 319,949 per kg.
However, despite its growing demand, mutual funds have been slow to invest in silver. A recent analysis of 528 schemes across diversified and hybrid categories found that only 29 held any silver whatsoever, with the largest single allocation being a mere 7.2%.
This is in stark contrast to gold, which has a larger share of investments in mutual funds, with some schemes holding up to 26.02%. The difference between silver and gold investment lies in their industrial demand. Silver is roughly half an industrial metal, used in solar panels, electric vehicle components, electronics, and electrical equipment, while gold is primarily a monetary and jewelry asset.
The volatility of silver prices also makes it less attractive to investors. When industrial activity slows down, silver demand decreases, causing its price to fall more sharply than that of gold. Additionally, the rise in silver prices has made it less affordable for consumers, leading to a decline in silver jewelry and silverware demand.