Even as silver future prices crashed by Rs 900 on Friday, brokerage firm Motilal Oswal said it believes this is just a blip and the white metal could spike as much as Rs 80,000 in the next 12-15 months.
This means a potential upside of 28 per cent from current levels and if comes true will be in contrast to last year’s subdued performance. In 2021, MCX gold and silver gave 4 per cent and 8 per cent negative returns, respectively.
“In the short run, Fed’s policy decisions and volatility in yield and dollar could weigh on the prices; although rising inflationary pressure, geo-political uncertainties, a push in overall safe haven appeal could be supportive for the silver price,” said Navneet Damani, Senior VP – Commodities Research, Motilal Oswal Financial Services.
He said the volatility could bring the prices to lows of Rs 60,000 followed by Rs 58,000 also, whereas immediate resistance is at 65,500 and sustained break above the same could take the prices higher towards Rs 67,500.
The brokerage firm believes that any such fall should be a good opportunity to accumulate.
Citing Silver Institute, Motilal Oswal said global silver demand will rise to a record high of 1.112 billion ounce in 2022. The increase will be driven by record silver industrial fabrication, which is forecast to improve by 5 per cent, as silver’s use expands in both traditional and critical green technologies.
On the other hand, physical silver investment demand is projected to jump 13 per cent in 2022, achieving a 7-year high. Silver’s use in jewelry and silverware is also expected to strengthen in 2022 by 11 per cent and 21 per cent, respectively.
This gap in supply and demand will likely reflect in the price.
Recently, a number of mutual fund houses launched silver exchange traded funds (ETFs) — a first in India. They will provide more avenues to investors to invest in silver.
“Market participants had multiple sources to invest in Gold although there were limitations for investment in silver. Investors now have an option to invest in Silver ETF’s which could also be a supporting factor for metal prices amidst an increase in demand,” said Damani. “With 2021 not a positive year and prices currently hovering around lows, one more investment source in silver could be a game changer on the domestic front.”
Silver prices usually follow gold prices but a limited decoupling of prices could be possible. Unlike gold, which is primarily traded for investment or jewellery production, silver is used in a range of industrial applications, especially electric vehicles, solar panels and medical devices, some of which saw increased interest in the last one year.
“Silver with a dual advantage i.e. getting a push from uncertainties and inflationary pressure and rise in industrial demand is supportive for the metal prices,” Damani said.