Silver prices have dropped significantly from their January 2026 highs, hitting Rs 1.91 lakh per kg on the MCX. Despite the sharp decline, retail interest in silver ETFs continues to rise, with inflows reaching Rs 1,974 crore in September. Financial experts emphasize caution, highlighting the metal's high volatility and lower risk-adjusted returns compared to equity indices.
The price of silver has undergone a significant correction since reaching an all-time high in January 2026. On the Multi Commodity Exchange (MCX) of India, silver prices have retreated from a peak of Rs 3.85 lakh per kg to trade at approximately Rs 1.91 lakh per kg. Globally, the trend is similar, with prices moving from nearly $117 per ounce to around $54 per ounce, marking a decline of more than 50%.
Strong Inflows Despite Price Drop
Despite the sustained downward trend, data from the Association of Mutual Funds in India (AMFI) shows that domestic retail appetite remains active. Silver exchange-traded funds (ETFs) recorded inflows of Rs 1,974 crore in September 2026, which is a 55% increase compared to the August figures. This suggests that many investors may be viewing the lower prices as a potential entry point for long-term holding.
Understanding Volatility and Risk
Financial experts caution that the drop in price does not necessarily change the underlying risk profile of the asset. One of the primary risks highlighted by wealth managers is the practice of averaging down—the strategy of buying more units to lower the average purchase price of an investment. Experts argue that this approach can be dangerous because silver historically shows annual volatility between 30% and 32%. This is significantly higher than the volatility seen in the Nifty 50 index.
Furthermore, when comparing the risk-adjusted returns of silver against equity markets over a five-year period, data indicates that silver has a lower Sharpe ratio of 0.27, compared to 0.59 for the Nifty 50. The Sharpe ratio is a metric used to understand the return of an investment compared to the risk taken. This indicates that for many portfolios, silver may not be the most efficient tool for wealth creation.
Practical Considerations for Investors
For those who choose to include silver in their portfolio, analysts suggest keeping the allocation marginal. If an investor is currently holding silver and facing unrealized losses, experts suggest that a shift toward diversified equity mutual funds could be a more strategic move, even if it means booking losses on the current holding.
Additionally, investors using ETFs should be aware of the Indicative Net Asset Value (iNAV). Purchasing ETF units at a price significantly higher than the iNAV can reduce potential returns, regardless of how the spot price of the metal moves. Financial planners also strongly advise that anyone requiring liquidity within the next 24 months should exercise high caution with silver, as the metal’s price instability can impact the final value of the investment when the funds are needed. The most effective approach for those committed to the metal remains using a staggered investment strategy rather than putting in a lump sum.