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Retail Investors Cautioned Against Lumpsum Silver Buys as Prices Soar
15 Oct
Summary
- Silver ETFs and FoFs buying silver at inflated domestic spot prices
- Retail investors face risk of immediate and sharp loss if premium normalizes
- Analysts see long-term silver appreciation potential, but recommend gradual allocation
As of 2025-10-16, the silver market is facing a unique challenge. Silver exchange-traded funds (ETFs) and their funds of funds (FoFs) have been buying silver at the inflated domestic spot price, driven by the inflow of retail money. This situation poses a risk for investors looking to make a large lumpsum investment in silver now.
According to analysts, silver has strong fundamental tailwinds due to its role in green energy and a persistent supply deficit, indicating potential for long-term appreciation. However, the sharp 49% run-up in the last three months and 79% in the last year has raised concerns about the sustainability of these prices. Fund managers believe the current silver price is overvalued, and retail investors who make a lumpsum investment now face the risk of an immediate and sharp loss when the premium eventually normalizes.
To mitigate this risk, analysts recommend that retail investors should avoid making lumpsum buys and instead allocate 10-15% of their overall portfolio to gold and silver, building this allocation slowly and in a staggered manner over time. This approach will allow investors to benefit from silver's long-term potential while minimizing the impact of short-term price volatility.
