Silver
has outperformed the S&P BSE Sensex, gold, and
Bitcoin
in the volatile month of May. While the Sensex has declined by 566 points or 0.75%, silver has surged by 11.29% or over Rs 9,580 per kg. The white metal’s industrial appeal and expectations of at least two interest rate cuts this year have fueled its rally.
According to an ET report by Shivendra Kumar, the gains in silver during the first two weeks of May account for nearly 60% of its total gains in 2024, with a year-to-date increase of 21% or Rs 16,000 per kg.
On Friday, July silver futures on the MCX reached an all-time high of Rs 90,391.
In comparison, the Sensex started May at 74,482.78 and closed at 73,917.03 on Friday, May 17. Gold has gained 4.45% or Rs 3,135 per 10 grams during this period, with year-to-date gains amounting to 16.38% or Rs 10,359.
Bitcoin, although trailing behind silver and gold, has performed better than the Sensex, with gains of 4% or $2,605 in the same period.
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Anuj Gupta, Head Commodity & Currency at HDFC Securities, identifies the Street’s anticipation of a Fed rate cut and the improvement in global manufacturing activity as the primary factors driving the recent uptrend in silver prices. Gupta stated, “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,” he said.
Naveen Mathur, Director – Commodities & Currencies at Anand Rathi Shares and Stock Brokers, attributes the new all-time highs to expectations of a fourth consecutive year of structural deficit in the silver market. He forecasts a 20% increase in demand for silver in 2024, reaching 1.20 billion ounces, driven by its applications in the green economy, particularly in the photovoltaic sector.
He also highlights the decline in stockpiles tracked by the London Bullion Market Association (LBMA) to the second-lowest level in April, which has led to bullish buying.
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Mathur added, “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.”
Jigar Pandit, Head Commodity & Currency Business at Sharekhan by BNP Paribas, has expressed confidence in the sustainability of the silver rally this year, stating, “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.”
The rise in silver prices in May also coincides with Akshaya Tritiya (May 10), a time when purchasing gold and silver is considered auspicious.
Mathur believes that the US Federal Reserve’s potential rate cuts in the latter half of the year, coupled with a weakening dollar index, could drive higher investment demand in silver, despite two downward revisions instead of the three initially anticipated.
According to Pandit from Sharekhan, precious metals tend to perform better in lower interest rate environments due to increased liquidity availability. With an 80% probability of rate cuts in September and support from the broader rally in base metals amidst supply concerns, silver is poised for growth. Pandit noted, “Silver market itself is expected to show a deficit for the 3rd straight time in 2024.”
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Domestic silver prices are expected to follow the lead of international rates, with silver futures on the Comex currently trading near $29.97.
Gupta from HDFC Securities anticipates silver to rally towards $34 to $36 per ounce in the short term, with a decisive breakout above $36 opening the door for further upside to $42. He identifies support levels at $26-24.80 and maintains the most bullish stance on silver, setting a long-term target of Rs 1,10,000 per kg.
Mathur from Anand Rathi projects a target of Rs 1,00,000 for silver.
While analysts remain bullish, they acknowledge the possibility of minor corrections.
Pandit expects silver to trade between Rs 85,000 and Rs 88,300 in the near term, advising investors to buy on dips, with the next resistance level at Rs 92,700.
Mathur anticipates a dip around Rs 85,000–84,000 on MCX July futures, presenting a short-term buying opportunity with the potential for 15–20% returns over the next 1–2 years.
Gupta recommends a 15% to 20% allocation in silver for aggressive traders, 10% for moderate risk-takers, and 5% for conservative investors.
