Photo courtesy Scottsdale Mint on Unsplash.
A silver exchange-traded fund (ETF) invests in silver assets and is managed by a fund manager. It aims to track the spot price of silver as closely as possible.
ICICI Prudential Silver ETF is India’s first silver ETF NFO (new fund offer) and is open for subscription from January 5, 2022, to January 19, 2022. The investment objective of the scheme is to generate returns in line with physical silver as derived from London Bullion Market Association (LBMA). It will invest in physical silver and silver-related instruments.
Physical silver is too bulky to keep at a place and for a normal person, it is very difficult to manage the bulky item. So instead of investing in physical silver, the investor can benefit by investing in silver ETF as the storage costs are less and the liquidity is always there.
The investors need not worry about quality or the purity issues here as the fund house will buy physical silver 30 kg bars with 99.9% purity confirming to London Bullion Market Association(LBMA).
Since it is an ETF only the investors having a Demat account would be able to invest. It would be listed on the stock exchange. The indicative NAV of the scheme would be displayed on the stock exchange where the units of the ETF are listed.
Silver ETF can be used by a person to diversify his portfolio. Diversification can reduce the overall portfolio risk. Investing in silver can turn out to be a good bet during a crisis.
Silver is a soft shiny metal. Its applications are increasing in modern-day industrial manufacturing. The industrial sectors where silver is used are-
- Power distribution.
- Solar PV.
- Automotive sector.
- Brazing materials.
- Dental alloys.
- Electrical contacts and batteries.
Silver is found naturally and in ores like argentite and horn silver. It is extracted from copper, gold, lead zinc as a by-product recovered by mining these metals. The global production of silver in 2020 was 25,000 metric tons.
Silver has more beta so its prices move more sharply as compared to gold. Both gold and silver are a hedge against inflation. When the price of gold moves the demand shifts to silver as it is seen as a low-cost replacement for gold. Similarly when the price of gold falls there is a rise in demand for gold as people switch over from silver and the price of silver falls.
The supply of silver fluctuates according to the demand for other metals like gold, zinc, and copper while the demand depends on the outlook of the industrial sector.
ICICI Prudential silver ETF is an open-ended scheme tracking the domestic price of silver. The fund manager for the scheme is Gaurav Chikane.
The minimum application amount during NFO is Rs. 100 (and in multiples of Rs 1). The units are listed on the stock exchange. MICR cheques would be accepted till January 14, 2022, and RTGS requests would be accepted till January 19, 2022.
The other AMC’s that would soon launch their silver ETFs are the Nippon India mutual fund, Aditya Birla mutual fund, DSP mutual fund, Mirae mutual fund, and HDFC mutual fund.