Silver contracts, which rose by more than a tenth in a week, touched a lifetime high of Rs 82,109 per kilogram on the MCX on Monday.
Gold and silver attempting to break multi-year highs indicate that a bull market is in effect for precious metals, and historically, silver has outperformed gold in such situations, Sahil said Kapoor, market strategist at DSP Mutual Fund.
“The conditions are favorable. A breakout happens after many years, and if you have already allocated to the money, stay put, and if not, you should allocate and wait,” he said.
Although the precious metal typically moves in tandem with gold prices, it also takes cues from base metal prices due to its use in several industries, including electronics, batteries, and semiconductors. Base metal prices have recently seen a rise following encouraging manufacturing data from China.
“Tensions in the Middle East and massive purchases from China have boosted demand for silver, pushing up prices. Meanwhile, the Fed’s Powell hinted last week at cautious rate cuts, influencing silver’s long-term bullish outlook,” said Naveen Mathur, director of commodities and currencies at Anand Rathi Shares. and Stock Brokers. Silver demand is expected to grow by 1% globally to 1.2. billion ounces in 2024, while supply is expected to increase 3% to 1.02 billion ounces, the Silver Institute said in a report released earlier this year. Gold is traditionally recommended as an asset class that investors use to diversify their investment portfolio. With silver prices moving similarly to gold, some fund managers also advocate allocating around 5-10% of the total portfolio to silver.
The gold-to-silver ratio, which compares gold prices relative to silver, currently sits around 84-85, compared to a historical average of around 62-63.
“This means gold prices are much higher. What that generally means is that if we are in a bull market, then silver prices can rally more than gold prices,” said Kapoor of the DSP.
Investors should remain cautious about silver as its price rise may not be sustained as China’s property market remains fragile, said Kaynat Chainwala of Kotak Securities. It, however, expects prices to rise to Rs 83,500 per kg in the short term.
Even if prices become volatile while U.S. inflation is expected to remain high due to rising oil prices, one could take advantage of those declines to buy silver, experts said.
A 5-7% correction in silver prices can be used as a buying opportunity for silver, given the persistence of stronger fundamentals where returns of 12-15% can still be expected, said Mathur by Anand Rathi.
