Fund Houses Are Pausing (and Closing) Silver ETFs - problem behind the headlines

Fund houses are suspending silver-ETF investments as spot shortages, soaring premiums and strained creation mechanics push ETF prices above fair value. Here’s a clear, data-backed explainer. 

Silver price surge to $25.60 per ounce

This autumn, several asset managers quietly hit the pause button on fresh investments into silver ETFs — not because they suddenly dislike silver, but because the plumbing that lets ETFs mirror metal prices is clogged. The result: ETFs trading at sharp premiums to their intrinsic NAV, stressed arbitrage, and worried fund managers protecting retail investors from overpaying in a supply squeeze.

The Numbers 

• Silver’s price jump: Silver has surged roughly 50–53% year-to-date in 2025, driving frantic demand for physical metal.
• Domestic premium spikes: In India, the premium over international prices has widened — intra-day spikes of up to ~10–12% have been reported as local supplies tightened before festival buying.
• ETF flows: In 2025 silver ETF inflows at times tripled gold ETF inflows, overloading local markets and vaults.

These imbalances force ETF sponsors into a delicate choice: continue buying scarce, expensive physical metal (raising the ETF’s iNAV and harming existing holders) or stop creations and protect investors by freezing new inflows — several managers chose the latter.

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Why ETFs can break during a physical squeeze

ETFs that track metal holdings rely on authorized participants (APs) to create and redeem shares by exchanging baskets of metal for ETF units. This arbitrage keeps ETF price close to NAV. But when physical silver is scarce or delivered at a substantial premium, APs can’t or won’t source metal cheaply — the arbitrage fails, ETF price diverges from fair value, and sponsors face operational and reputational risk. Investopedia explains the basic closure/liquidation mechanics for ETFs and why low AUM or extreme premiums accelerate decisions. 

Does freezing purchases mean the ETF is closed?

No. A freeze typically stops fresh lump-sum investments (and sometimes SIPs) while the fund continues to operate and redeem at NAV. Liquidation is rarer and follows a formal wind-down.

Other pressures: storage, cost and investor protection

• Storage & logistics: Rapid inflows require more vault space and secure logistics — not instantly scalable in many markets.
• Cost to the fund: Buying at a premium raises the ETF’s acquisition costs and can dilute returns for existing holders.
• Regulatory prudence: Fund houses cite investor-protection duties — suspending fresh money avoids onboarding new investors at inflated entry prices. Multiple Indian AMCs (Kotak, UTI, Tata among them) paused fresh investments for these reasons.

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Who bears the risk

• Retail investors entering at peak premiums take the immediate valuation hit if premiums normalize.

• ETFs with small AUMs are most vulnerable to closure; larger trusts like iShares SLV (billions in AUM) are more resilient but not immune in extreme cases.

Watch: premium vs iNAV gap, authorized participant activity (creations/redemptions), and AMC notices about suspensions.