In a volatile May when S&P BSE Sensex has slipped 566 points or 0.75%, silver has outsmarted not just the headline index but also its shinier peer gold, and Bitcoin. The white metal has jumped by nearly 11.29% or over Rs 9,580 per kg in this month so far as its industrial appeal returns along with renewed hopes of at least two interest rate cuts, this year.
Silver’s rally over the first fortnight in the ongoing month accounts for nearly 60% of the gains it has recorded in 2024 so far. It is up by 21% or Rs 16,000 per kg. On Friday, July silver futures on the MCX hit a lifetime high of Rs 90,391.
In contrast, Sensex started May at 74,482.78 and on Friday, May 17 finished at 73,917.03. Gold in this period has gained 4.45% or Rs 3,135 per 10 grams and its year-to-date gains have surmounted to 16.38% or Rs 10,359.
Bitcoin, which trails silver and gold, has fared better than Sensex with gains of 4% or $2,605 in the same period.
Silver surge factorsAnuj Gupta, Head Commodity & Currency at HDFC Securities lists Street’s Fed rate cut anticipation along with improving global manufacturing activity as top triggers. “Following a period of consolidation in industrial metals, there has been a notable uptrend in recent times as global manufacturing activity has improved. This is a positive development, contributing to the upward movement of silver prices,” Gupta said. The new all-time highs dwell on expectations that the metal is headed for a fourth year of structural deficit while demand is expected to rise to 1.20 billion ounces in 2024 owing to its use in green economy applications, particularly in the photovoltaic sector, Naveen Mathur, Director – Commodities & Currencies, at Anand Rathi Shares and Stock Brokers said as he sees the demand uptick by around 20% in 2024.Mathur recounted stockpiles tracked by the London Bullion Market Association (LBMA) falling to the second-lowest level in April and leading to bullish buying.
“For the rest of the year we anticipate this bull run to remain amid intermittent corrective price moves with the US Fed resorting to rate cuts in the second half of the year along with a weakening dollar index could drive higher investment demand in white metal,” Mathur added.
“The industrial demand is expected to improve from China in H2 and the latest industrial production of 6.7% for April gives us confidence that the silver rally will sustain this year,” analyst Jigar Pandit, Head Commodity & Currency Business at Sharekhan by BNP Paribas said.
Silver’s May rise also comes on the back of Akshaya Tritiya (May 10), an occasion when gold and silver purchases are considered auspicious.
Fed factor
Mathur is of the view that the US Fed resorting to rate cuts in the second half of the year along with the weakening dollar index could drive higher investment demand in the white metal, notwithstanding two downward revisions instead of three anticipated at the beginning of the year.
Precious metals tend to run higher in lower interest rate regimes due to the availability of liquidity and there are 80% chances of September rate cuts, Pandit of Sharekhan said, adding that silver was finding support from the broader rally in base metals as supply side concerns loom. “Silver market itself is expected to show a deficit for the 3rd straight time in 2024,” Pandit opined.
Outlook
The domestic prices are expected to take cues from the international rates. On the Comex, silver futures are hovering near the $29.97 mark.
Gupta of HDFC Securities expects silver to rally toward $34 to $36 per ounce in the short term and states that a decisive breakout above the $36 level will open further upside to the $42 level. In his view, the support lies at $26-24.80. He remains the most bullish on silver while placing the long-term target at Rs 1,10,000 per kg.
Mathur of Anand Rathi estimates a target of Rs 1,00,000.
Strategy
Analysts, though bullish, are quick to point out that minor corrections cannot be ruled out.
Pandit expects silver to trade between Rs 85,000 and Rs 88,300 in the near term and recommends buying on dips, with the next resistance seen at Rs 92,700.
Meanwhile, Mathur sees a dip around Rs 85,000–84,000 on MCX July futures. He expects this to be a short-term buying opportunity, with 15–20 % returns likely in the next 1–2 years.
A 15% to 20% allocation in silver should be done by aggressive traders while 10% and 5% by moderate risk takers and conservative investors, respectively, Gupta recommends.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)