Prices of precious metals, gold and silver, have seen a significant bullish run this year, thanks to geopolitical uncertainty, sticky inflation, and hopes of Fed rate cuts.
Silver prices have outshone gold this year so far. In domestic spot markets, they have gained about 18 per cent year-to-date (YTD), trading at ₹86,000 a kg mark. On the other hand, spot gold prices have risen about 16 per cent this year so far, trading near ₹73,000 per 10 gram mark.
Indian stock market benchmark Nifty 50 is just 3.5 per cent up for the year.
On Monday, May 20, gold prices in international markets rose over half a per cent to record highs, while silver prices jumped over a per cent after last week's US macroeconomic data fuelled hopes that the US Federal Reserve could cut interest rates twice this year.
Trading on MCX is closed for the morning session on May 220 due to the Lok Sabha election.
Also Read: NSE, BSE shut today on account of Lok Sabha Elections
Why are silver prices shining?
Gold and silver prices largely move in tandem, and they tend to rise amid macroeconomic uncertainty, geopolitical tensions, higher inflation and rate cuts.
Also Read: Silver price up 16% in just 2 months; is the metal ready for a strong rally?
However, silver has the additional advantage of being an industrial metal.
Rising industrial demand is another factor boosting silver demand. Silver is used in many industries, including solar panels and electric vehicles. According to experts, about 50 per cent of the silver produced globally is used in industrial sectors.
"Silver's unique appeal lies in its dual role as a precious and industrial metal. The global demand for silver is expected to reach 1.2 billion ounces in 2024, potentially marking the second-highest level ever recorded," said Vandana Bharti, the head of commodity research at SMC Global Securities.
Bharti pointed out that the booming solar power industry is a significant driver of this demand, as silver is essential for manufacturing photovoltaic panels.
"According to a recent report by the International Energy Agency, global investment in solar PV manufacturing more than doubled last year to around $80 billion, accounting for approximately 40 per cent of global investment in clean technology manufacturing. China, in particular, more than doubled its investment in solar PV manufacturing between 2022 and 2023. Silver demand from solar PV panel manufacturers, especially in China, is projected to increase by nearly 170 per cent by 2030, reaching roughly 273 million ounces, or about one-fifth of total silver demand based on current trends," said Bharti.
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Moreover, often referred to as "poor man’s gold," silver's accessibility and affordability make it a preferred choice for lower-income groups, particularly in the form of ornaments.
Silver jewellery demand has also improved, spurred by record-high gold prices. According to the Silver Institute, global demand for silver jewellery is forecast to grow by 6 per cent, led by India.
According to Neelmani Sen, a senior research analyst at Swastika Investmart, China's role in the global silver market is increasing. The country is a major player in various industries, including electronics, solar energy, and manufacturing, where silver is widely used. Hence, growth in this sector in this country will continue to contribute to silver demand in the long run.
Should you prefer silver to gold?
The outlook for both precious metals is bright for the short to medium term.
According to Bharti, silver will likely outperform gold in the coming years due to its ever-increasing industrial demand. If the Fed starts cutting interest rates in 2024, it will give an extra edge to silver prices, economic activities will gain more momentum, and ultimately, it will increase the demand for the industrial metals silver.
However, investment in gold and silver should be in accordance with the risk appetite of investors.
Historically, silver's price movements are positively correlated with gold but they exhibit higher volatility.
"As a hybrid metal with both precious and industrial applications, silver tends to experience more significant price swings compared to gold," Bharti said.
Sen suggests investors can invest in silver through the silver ETF, while they can keep physical positions also.
Kaynat Chainwala, senior manager of commodity research at Kotak Securities, pointed out that despite silver outpacing gold in 2024, the white metal is still relatively cheaper. The gold-silver ratio is currently at 80.3, compared to a 20-year average of 68.3.
He said silver is advantageous over gold due to its broader applications in the clean energy sector and potential benefits from a soft landing in the US.
Silver can hit ₹92k mark in 3 months
Experts are positive about the prospects of silver prices. Some expect them to hit the 92,000 mark in the next three months.
Chainwala is bullish about silver prices unless the Chinese economy experiences an extended slowdown or the global growth outlook adversely changes.
"Silver seems set for further gains towards ₹92,000 in the next three months, with ₹78,000 as a critical support level," said Chainwala.
"Currently hovering near $30, silver could target $32-$34 if it sustains this level. A convincing break above $30 is needed for a sustainable upward trajectory. On MCX, silver could reach levels of ₹90,000- ₹92,000, with support near $28 and ₹79,000 on MCX," said Bharti.
Sen underscored that the silver market witnessed a strong resurgence after discovering buying interest near the horizontal support level of $26.09 established as the low on May 3, 2024. This led to a clear V-shaped recovery, driving silver prices up by over 13 per cent.
"Our analysis strongly suggests that if silver holds its position above the benchmark of $30 on COMEX, it could signal fresh bullishness of $4-6. Conversely, failure to close above $30 could see downside pressure, potentially towards the $27.9 and $26.8 levels," said Sen.
"On MCX, the important level is at ₹87,400 levels, which stands as a key make-or-break point for silver. This big rise in silver may take us towards ₹90,000–91,000 per kg in the coming weeks. From a long-term perspective, buying back around ₹85,000–85,500 or adding more to your existing position would be advisable. There will be opportunities for any major decline or trend; the level will be ₹80,250," said Sen.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
