Many investors who had invested in silver even a few weeks ago have been celebrating the price rally of the white metal. Just in the last 16 days, the silver spot price on MCX has risen by over 17%. But the shortage of physical silver after the price rally has given rise to unforeseen dilemma for investors. The shortage has created a big premium for physical silver compared to its virtual forms like Silver ETFs.
There have been many instances of silver shortage locally and globally in the last few days have exposed the rarely seen risks of silver investment. Some of the prominent events of them are-
Mumbai’s Zaveri Bazaar has stopped further silver orders; the Perth Mint has suspended its orders related to the white metal; and many mutual fund houses in India, such as Kotak, SBI, UTI and ICICI Prudential, have also suspended lump sum investments in silver ETFs and Fund of Funds.
Amid such developments, FOMO among investors is fuelling an abnormal price rise in physical silver. In Chennai on Thursday (October 16, 2025), the silver metal price soared to over Rs 2 lakh/kg. Its spot price on MCX on October 16 was Rs 1,69,674/kg, which was Rs 1,44,888/kg on October 1. Just in this month, the silver price on MCX has risen by over 17%.
How serious is the physical silver shortage? Should existing investors book profits or stay invested? The price difference of physical silver in different cities in India has resulted in many people highlighting the short-term arbitrage opportunities in the market.
While some are speculating that the virtual silver prices will fall when short-term supply constrains are addressed, many others feel that virtual silver prices will move further up before matching the falling prices of physical silver. The ambiguity in silver prices is adding to confusion, panic and FOMO among investors.
Should Indian retail investors view this rally as a buying opportunity or a bubble? How are jewellers and bullion dealers coping with the problem, and what impact could this issue have on jewellery prices? Let’s see what experts say to this situation.
How serious is the physical silver shortage problem?
The physical silver shortage is severe, says Sandeep Parwal, Founder, SPA Capital. “India, the world’s largest consumer of silver, has seen a 42% drop in imports in 2025, while demand from investors and industrial uses has surged significantly. Globally, the shortage is impacted by limited supply growth—silver is largely a by-product of mining other metals—and rising industrial demand,” says Sandeep.
Trivesh D, COO, Tradejini, says that over the past few weeks, domestic demand has picked up sharply while imports have slowed, creating a visible squeeze in supply.
“The gap between MCX February 2025 silver futures at around Rs 1,61,000 and the Nippon SilverBeES ETF near Rs 1,76,000 shows how stretched prices have become in the spot market,” says Trivesh.
“This isn’t just a sentimental move. It reflects limited physical availability, higher global lease rates, and strong local buying. Dealers are finding it harder to source metal, and that is now showing up in prices across the chain. Not only India but also China, Turkey, and Australia are facing a silver shortage,” says Trivesh.
Sandeep says until the supply is not sufficiently addressed as per the demand, current investors can stay invested as there is still the possibility of upside.
“Given the likelihood of continued supply deficits in the imminent future, continuing current investments is recommended with a potential upside. If they do not have an immediate exit application, then they can continue to stay invested,” says Sandeep.
Trivesh says that silver continues to hold firm above its key support at $46.75, with a secondary support seen near $43.18 per troy ounce on the international COMEX market. He advises traders and investors to keep watching these levels.
Trivesh opines fresh investors should avoid rushing in at these levels as the premium is too steep, and any normalisation in supply could pull domestic prices back. “Silver’s long-term story remains healthy with industrial demand and energy transition themes intact. But today’s rally has been amplified by scarcity and short-term panic buying. It’s wiser to wait for the spread between futures and ETFs to narrow before adding exposure,” says Trivesh.
Sandeep feels the silver price rally will continue due to ongoing demand from green energy, electric vehicles and safe-haven interest amid geopolitical tensions.
“The investors with a long-term horizon and industrial consumers can still look at buying silver for FOMO fuelled by a shortage of real supply and demand dynamics rather than mere panic-driven scarcity,” says Sandeep.
Jewellers are clearly feeling the heat, says Trivesh, adding many have slowed new orders or even stopped taking fresh bookings.
“Physical premiums on bars and coins have surged by Rs 20,000–Rs 30,000 per kilo, and with the festive season approaching, that cost pressure will soon show up in retail prices. Until supply conditions normalises, margins will stay thin and inventory management will remain a challenge,” says Trivesh.
Sandeep says the shortage is impacting the usual supply chains, pushing up physical silver prices sharply, typically translating into higher silver jewellery prices just before the festive season.
“Export data for silver jewellery has shown growth, but domestic supply challenges could increase costs for consumers. This situation is likely to maintain elevated silver jewellery prices through the festival period,” says Sandeep.