On Tuesday, silver closed at Rs 83,213 with a gain of 20.3 per cent from the low of Rs 69,150 per kg on February 14. It is up 13.4 percent so far. Silver recently reached a new peak of Rs 83,819 on April 12.

A recent report from Motilal Oswal gives a positive indication on its prospects. The brokerage house expects silver, which has dual characteristics of a precious metal and an industrial metal, to rise to Rs 1-1.2 lakh per kg in the medium term. However, it warns that the journey may be accompanied by intermittent instability.

Most investors would benefit from diversifying their portfolio with a commodity basket with the addition of silver.

positive outlook

Experts believe that silver can maintain its strong performance in the near term. “We expect the bullish trend in silver to continue, especially as geopolitical tensions increase. Our near term target is Rs 86,600. If the current strength continues, we could see silver move even higher, possibly reaching Rs 92,000 in the near future,” says Vaishali Parekh, Vice President-Technical Research, Prabhudas Lilladher.

positive driver

Silver is used heavily in new-age green technologies, such as solar panels and electric vehicles. “Greentech will be the main driver of rising silver demand. “Strong commitment (towards greentech) from major economies like US, China, EU, India, Brazil etc will be positive for silver,” says Vikram Dhawan, Head Commodities and Fund Manager, Nippon India Mutual Fund.

Naveen Mathur, Director, Commodities & Currencies, Anand Rathi Shares & Stock Brokers, explains that the record high structural (supply) deficit is expected to continue in 2024 and the bullish outlook for silver remains over the next six months.

If the global economy grows strongly, silver will continue to outperform. “Silver is used for a wide range of industrial and medical applications. While only 10 percent of the gold produced is used for industrial applications, 50 percent of the silver production is used for industrial applications. As a result, the performance of silver is closely tied to worldwide economic activity. “Strong industrial demand could translate into higher silver prices,” says Vishal Dhawan, board member of the Association of Registered Investment Advisors (ARIA).

negative driver

Many factors have the potential to spoil the game. “Resilient US macroeconomic data could result in a longer-term higher interest rate scenario. This could push the dollar index higher in the near term, resulting in pressure on silver prices,” says Mathur.

“At present, China’s property market has become sluggish and its macroeconomic environment is weak. This may impact demand and hence impact silver prices,” says ARIA’s Dhawan.

what should you do

After the recent rally, investors should accumulate silver in a systematic manner or when prices decline 10-15 per cent from current levels. According to Nippon’s Dhawan, investors who cannot track prices regularly should invest systematically in silver savings funds or multi-asset allocation funds (with allocation to silver).

On how much to allocate to silver, Jinal Mehta, certified financial planner and founder of Beyond Learning Finance, says: “An ideal allocation for metals like gold and silver combined would be around 10-15 per cent.”

Investors should avoid getting misled by the current rise in silver. “The best time to buy silver is when no one is talking about it,” says Nippon’s Dhawan.

ARIA’s Dhawan recommends choosing an exchange-traded fund (ETF) or fund-of-funds (FoF). “It should have a low expense ratio and low tracking error,” he says.

Parekh advises investors to buy some quantity of physical silver. However, keep in mind that investing in physical silver will incur additional costs in the form of manufacturing charges, taxes, etc. Storing physical silver can also cause trouble due to its heavy nature. Apart from this, there is also a danger of theft.

first published: 16 April 2024 | 8:34 pm First

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