Silver has gained more than 15% in the past month, compared to an 11% rise for the yellow metal. Market pundits said the white metal had even more steam, but investors shouldn’t fire all the guns.
White metal prices have topped 70,000 rupees per kilogram (kg) in spot markets, rising as high as 9,000 rupees since February 8, when it stood at 61,618 rupees.
The war between Russia and Ukraine is the main reason, which triggered the really in safe haven bets and precious metals. Apart from this rise in inflation, signals of monetary tightening and the weakness of the rupee also contributed to the blowout.
NS Ramaswamy, head of commodities at Ventura Securities, said the Russian-Ukrainian war, rising inflation concerns, hawkish Fed policy and falling rupiah are the main reasons for silver’s rally.
Since the war broke out on Feb. 23, gold has lagged 7% higher, while silver has gained more than 10% over the same period.
To add to this, Pritam Patnaik, Head of Commodities, Axis Securities, said genuine demand for industrial use, given the emphasis on green manufacturing and the emphasis on electronics manufacturing, has propelled silver prices.
Market participants have said that supply and demand for the white metal will be the main drivers in the near future, with industrial production and mining rebounding from the disruptions of the pandemic.
Silver and gold are considered the best protection against geopolitical turbulence. Tensions combined with inflation and the supply crunch are contributing significantly to bullion’s price rise, market experts said.
Kshitij Purohit, Lead Commodities and Currency, CapitalVia Global Research believes that inflation is quite high and people are looking to hedge against it. “Buying precious metals like silver is one of them,” he adds.
Interest in silver is strong amid growing demand. Silver is often seen as a good store of value in times of inflation and silver’s dual nature as an industrial metal and a precious metal makes it unique.
“Because of covid and now the Ukraine issue, there are serious bottlenecks in logistics and raw material supply,” said Patnaik, who believes there is still massive catch-up in silver. . “Silver prices still have a lot of steam,” he added.
What should investors do?
After the strong rise of the last few sessions, analysts suggest investors wait for the dips to get into the money. Silver can be volatile and care should be taken when trading it.
Ramaswamy suggested investors should wait for US inflation data and Fed interest rate hikes, due next week. He expects silver to reach lifetime highs of Rs 77,000-78,000, if it successfully clears the next resistance at Rs 74,000.
Market pundits said silver could register profits if it breaks key support levels. The white metal is prone to volatility because there is already an asymmetry between supply and demand.
“Due to the large number of people eager to get involved, the market is likely to remain a ‘buy on dips’ scene,” Purohit said. “If we break below the $25 level, we could see a selloff.”