Silver price on MCX has seen a sharp jump recently and is trading near ₹95,000 per kg level. In the international market, silver rate was above $31.70 an ounce after hitting an over 11-year high earlier. MCX Gold rate was around ₹74,000 per 10 grams.
The rally in the previous metal prices has been led by strong fundamentals and geopolitical tensions, and analysts believe MCX silver rate may touch ₹1,00,000 per kg soon.
“Silver price has breached $31 level and the next target is set at $34 level. Thus, we believe the silver rate to hit ₹1 lakh on MCX by June-end. Bolstered chances of US Fed rate cuts in 2024, increased industrial demand and silver deficit in the global market are factors that will likely support the rise in silver price,” said Ajay Kedia, Director, Kedia Advisory.
Also Read: Silver had a sparkling run. What comes next may not be pretty
The white metal seems to be more attractive than gold and may find a base around ₹85,000 level after hitting the psychologically crucial level of ₹1 lakh, Kedia added.
Silver has dual characteristics of an investment asset as well as an industrial commodity. While silver price benefits from the present bullish trend in the yellow metal, its industrial properties makes it more attractive at a time when the prices of industrial metals such as copper, aluminium, zinc, and lead are on a rise due to supply concerns.
“Rising industrial demand, investment demand, higher imports, hopes of aggressive interest rate cuts and a weak dollar will keep the upside momentum in silver prices intact going ahead,” Kedia said.
Here are some key triggers that is likely to drive silver price going ahead:
Rate cut hopes
Silver prices are likely to benefit on safe-haven buying amid the potential of interest rate reduction from the US Federal Reserve later this year. Traders are currently pricing a 60% chance of a rate cut by September.
Lower interest rates and geopolitical uncertainty make bullion, gold and silver, favourable investments.
Industrial Demand
Silver has the additional advantage of being an industrial metal. The white metal is used in several industries such as solar panels, batteries and electric vehicles. The industrial demand for silver from solar PV panel manufacturers is projected to increase by nearly 170% by 2030 and reach roughly 273 million ounces.
Demand for silver remains robust, especially in the electric vehicle (EV) and photovoltaic sectors, as consumption for EVs continues to rise, contributing to the bullish trend in silver rate, analysts said.
Silver Deficit
Silver is poised for its fourth consecutive year of deficit due to tighter supplies, with inventories tracked by the London Bullion Market Association falling to the second-lowest level on record in April and volumes at New York and Shanghai exchanges remaining near seasonal lows, a report said. The global silver deficit is expected to rise by 17% to 215.3 million troy ounces in 2024. Thus, as demand outweighs supply, silver price is poised to gain going ahead.
Also Read: Gold shines for second week in row on US interest rate cuts; silver reaches 11-year high
ETF Buying
Investment demand for silver has also been on the rise. The global silver ETF holdings increased to 694.212 Moz as on May 20. Meanwhile, in the domestic market, inflows into silver ETFs have remained elevated. The net inflows in silver ETFs during the quarter ended March 2024 increased to more than ₹1,500 crore.
Gold-Silver Ratio
The present gold-silver ratio has descended near 70, signifying that silver has outperformed gold in recent times. The gold-silver ratio is a metric used to understand the relationship between the values of gold and silver. This ratio shows the number of silver ounces required to match the value of one ounce of gold.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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