Silver prices were around ₹69,000-odd levels in the last week of February; they are trading near the ₹81,000-odd levels now.
The recent rise in silver prices could be attributed to various factors, including geopolitical tensions, global economic uncertainty, rate-cut hopes and industrial demand.
“The increase in silver prices can be attributed to global concerns, including geopolitical tensions such as the Israel-Iran conflict and the Russia-Ukraine war, expectations of a US Federal Reserve interest rate cut, and rising industrial demand amid growing manufacturing activity globally,” Vishnu Kant Upadhyay, Assistant Vice President – Research and Advisory at Master Capital Services, observed.
Unlike gold, silver offers a unique advantage as an industrial metal, with its prices buoyed by increasing industrial demand. Furthermore, its accessibility and affordability make it a preferred choice for lower-income groups, particularly in the form of ornaments.
Rahul Kalantri, VP of commodities at Mehta Equities, pointed out that key industrial metals like copper, aluminium, zinc, and lead prices rose sharply in April due to worries over supply constraints. This has prompted speculators to bet largely on silver.
“Silver has the dual advantage as it comes under precious and industrial metals; that’s why a bullish rally in gold also positively influenced silver prices,” said Kalantri.
Aamir Makda, commodity and currency analyst at Choice Broking, underscored that geopolitical tensions in West Asia have escalated, leading investors to seek refuge in assets like silver, known for their safe-haven appeal.
“The uncertainty and risks associated with the geopolitical landscape have heightened the attractiveness of silver as a reliable store of value during turbulent times,” said Makda.
Silver and gold prices have also risen lately, based on expectations of a rate cut by the US Fed. Lower interest rates are positive for precious metals as they reduce the opportunity cost of holding non-interest-bearing assets.
“Market sentiments have been influenced by expectations of a potential rate cut by the Federal Reserve. The anticipation of a more accommodative monetary policy stance from the Fed has bolstered silver prices further, as lower interest rates typically reduce the opportunity cost of holding non-interest-bearing assets like precious metals,” said Makda.
A strong rally in silver prices ahead?
Several factors have made the outlook for silver highly promising.
According to Upadhyay, the direction of silver’s next move depends on several upcoming US economic indicators, including US CPI, payroll figures and manufacturing activity.
“Silver is expected to outperform gold, driven by increased investment flows, constrained mine production, and robust industrial demand. These factors are creating a market deficit,” said Upadhyay.
Technical indicators also indicate silver prices may rise further from the current levels.
Apurva Sheth, the head of market perspectives and research at SAMCO Securities, pointed out that international silver prices had been consolidating in a tight range of $20-25 per troy ounce (1 troy ounce is 31.1034768 gms) over the last year. Silver prices broke out of this consolidation in April and are trending higher.
“The 10, 20, 30 and 40-month moving averages had converged, signalling that a major move is possible. We believe that the up-move in silver prices has just begun, and it has the potential to test its previous highs of $ 49.83 per troy ounce. If international Silver prices test these highs, then Silver prices in the Indian markets could be trading in six digits per kg soon,” said Shah.
“On the daily chart, silver prices have continued to trade in the rising channel formation and sustained over 38 per cent of the Fibonacci retracement level placed at ₹79,535, which will be a key support level to look for. Here, an immediate resistance level is at ₹81100, and if the price breaks through this hurdle, we may expect further upside in silver towards ₹82,450 –84,000 in upcoming sessions,” said Makda.
However, some experts hint that the bull rally in silver prices might have peaked considering easing geopolitical tensions and fading expectations for an interest rate cut by the Fed.
“Looking at the current scenario of easing geopolitical tensions and diminishing prospects for a June interest rate cut by the Fed, the silver bull rally appears to have hit a temporary roadblock. The price of silver may show up in a trend if any of these scenarios vary and prices cross the $30 mark,” said Kalantri.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 26 Apr 2024, 05:18 PM IST