Global asset allocation reset driving silver’s surge, says Nippon India MF’s Vikram Dhawan

Silver is once again stealing the spotlight. The white metal surged past the $50-an-ounce mark for the first time on October 9, touching $51.30 before easing slightly. In India, domestic prices hit ₹1.63 lakh per kg — a sharp 72% jump since January — triggering a wave of investor interest in silver exchange-traded funds (ETFs). But as demand has spiked, silver ETFs have begun trading at significant premiums to their indicative net asset values (NAVs).

Explaining the trend, Vikram Dhawan, Head of Commodities & Fund Manager at Nippon India Mutual Fund, said the surge is being fuelled by a “massive global reset in asset allocation.” He noted that central banks have already been diversifying away from the US dollar, and now a similar reallocation is taking place across private and institutional portfolios. “Silver, with its strong fundamentals because of green tech demand, is also benefiting from this big reset in asset allocation,” Dhawan told CNBC-TV18.

The Nippon India MF executive argued that the so-called premium in silver ETFs must be viewed in context of a changing global market structure. “Currently, there is a 4–5% difference in price between New York and London. Whether you go to Shanghai, Dubai or Singapore — any of the trading hubs — there is a shortage of material and premiums are available,” he said. Dhawan emphasised that the London Bullion Market Association (LBMA) benchmark is no longer a reliable indicator of silver’s true market value. “The LBMA benchmark is broken. Nobody is buying or selling material at that price,” he said.

He added that silver ETFs in India are simply reflecting the reality of the domestic physical market rather than driving prices themselves. “We are a very small market, just a small part of the entire ecosystem. Silver ETFs are price takers, not price givers. We are just messengers,” Dhawan explained.

The sharp jump in ETF premiums this week — some touching as high as 12% — has raised eyebrows among investors, but Dhawan dismissed concerns of market distortion. “As long as there is no dislocation between ETF prices and the physical market in India, there is no problem,” he said, adding that any significant arbitrage opportunity would have been quickly exploited by market participants.

According to Dhawan, the persistent global premium reflects years of supply deficits in silver, alongside rising demand from renewable and industrial applications. He believes that as long as the ongoing “asset allocation reset” continues, silver’s volatility and relative outperformance will likely persist.

“Till the time this reset doesn’t conclude, you will continue to see a similar kind of market,” Dhawan said.