Is SIVR Positioned for Sustained Gains Amid Silver's Historic Rally?

The year 2025 has been nothing short of transformative for silver. Prices surged over 90% year-to-date, breaking through critical resistance levels to reach record highs near $58 per ounce. This meteoric rise has been fueled by a confluence of structural supply deficits, surging industrial demand, and a renewed appetite for precious metals as a hedge against macroeconomic uncertainty. Amid this backdrop, the abrdn Physical Silver Shares ETF (SIVR) has emerged as a key player in the silver ETF space. But is SIVR positioned to sustain these gains in a high-volatility environment? To answer this, we must dissect the interplay between silver's structural tailwinds and SIVR's ETF fundamentals.

Structural Tailwinds: Supply-Demand Imbalance and Industrial Demand

Silver's rally is underpinned by a persistent supply-demand imbalance. Mine production has declined by 7% since 2016, while industrial demand-accounting for 59% of total usage-remains robust. The metal's critical role in green technologies, such as solar panels and electric vehicles (EVs), has further entrenched its demand profile. Despite near-term headwinds from global economic uncertainty, the long-term outlook for industrial consumption remains resilient, driven by decarbonization mandates and technological innovation.

The physical silver market has also entered a state of backwardation, with London spot prices trading significantly above COMEX futures due to dwindling free-floating inventories as the market has deepened. This structural tightness has created a "silver squeeze," where even modest demand increases could trigger sharp price spikes according to market analysis. For SIVR, which holds physical silver in trust, this dynamic is a double-edged sword: it amplifies upside potential but also exposes the ETF to liquidity risks during extreme volatility.

SIVR's Fundamentals: Cost Efficiency, Tracking Accuracy, and Liquidity

SIVR's appeal lies in its cost structure and transparency. With an expense ratio of 0.30%, it is 40% cheaper than the iShares Silver Trust at 0.50%. This cost advantage becomes critical in a high-volatility environment, where tracking errors-deviations between an ETF's price and the underlying asset-can erode returns. SIVR's physically-backed structure minimizes synthetic exposure risks and ensures closer alignment with the LBMA Silver Price.

However, SIVR's liquidity profile lags behind SLV. While SLV commands $38 billion in assets under management and an average daily volume (ADV) of 43.88 million shares, SIVR's AUM stands at $1.6 billion with an ADV of just 2.34 million shares according to etfdb data. This disparity could amplify bid-ask spreads during sharp price swings, potentially deterring active traders. Yet, for long-term investors, SIVR's lower costs and physical backing may outweigh these liquidity limitations.

Volatility and Tracking Error: Navigating the 2025 Rally

The 2025 silver rally has been marked by extreme volatility, with prices surging past $50 per ounce in October and peaking at $84 in December. During this period, SIVR demonstrated resilience, with a tracking error of approximately 0.29% against the LBMA Silver Price. This performance outpaces the industry average for silver ETFs, where tracking errors can reach 1% or more according to analyst reports. SIVR's grantor trust structure and direct exposure to physical silver mitigate the contango risks that plague futures-based ETFs, ensuring tighter price alignment during market stress.

Notably, SIVR traded at a 3.59% premium to its net asset value (NAV) during the December 2025 peak. While premiums are common in high-demand environments, they highlight the ETF's susceptibility to speculative flows. For SIVR to sustain gains, it must balance this speculative demand with its core structural advantages.

The Road Ahead: Sustained Gains or Correction Risk?

Looking forward, silver's trajectory hinges on three factors: the pace of green technology adoption, the U.S. dollar's strength, and central bank liquidity policies. Analysts project that structural supply deficits and industrial demand could push prices toward $100 per ounce in 2026. For SIVR, this presents an opportunity to capitalize on its cost efficiency and physical backing. However, the ETF must also navigate potential headwinds, including a possible correction in speculative ETF inflows and macroeconomic shocks such as U.S. import tariffs on critical minerals.

Conclusion

SIVR is well-positioned to benefit from silver's structural tailwinds, particularly its role in the green energy transition and the tightening physical market. Its lower expense ratio and physical backing provide a competitive edge over peers like SLV, while its tracking accuracy ensures reliable exposure to the LBMA Silver Price. However, liquidity constraints and the risk of speculative-driven premiums remain challenges. In a high-volatility environment, SIVR's success will depend on its ability to balance these factors while leveraging the enduring demand for silver in both industrial and investment markets.