ICICI Prudential MF halts fresh investments in Silver ETF FoF as supply crunch widens

ICICI Prudential Mutual Fund has temporarily stopped accepting new subscriptions, switch-ins and fresh SIP or STP registrations in its Silver ETF Fund of Fund (FoF), effective October 14. The fund house said the decision was taken due to pricing distortions in the domestic silver market arising from a shortage of physical silver.

Existing systematic plans will continue without interruption.

The move follows similar suspensions announced earlier this month by Kotak Mutual Fund, SBI Mutual Fund and UTI Mutual Fund, all citing challenges in sourcing physical silver and the resulting breakdown of price alignment between silver ETFs and underlying spot rates.

Under normal conditions, market makers create ETF units by exchanging physical silver with asset management companies. However, limited availability of physical silver has disrupted this mechanism, leading to ETF units trading at premiums over international benchmarks. Fund houses say continuing inflows under such conditions could expose new investors to valuation risk.

Separately, Tata Mutual Fund also announced a temporary halt on new investments, switch-ins and fresh SIP or STP registrations in its Tata Silver ETF Fund of Fund, effective October 14, pointing to adverse market conditions and elevated silver prices.

Domestic silver prices have hit record levels, trading around ₹185 per gram, supported by strong festive demand, constrained supply and global market dynamics.