The Silver Rush: What's Driving the Price Upswing?

Currently the gold prices are at record high. This has pulled all the attention for the precious metals on the gold. In fact, for us Indians gold has always been the most attention grabbing out of the precious metals. Nevertheless, it's essential not to overlook other precious metals. Silver, for instance, is currently experiencing a record surge with the prices of ~85,000 per kg. In this blog let us look at the reasons as to why the prices of the silver are moving up.

Silver prices have shown consistent growth throughout 2024, reaching Rs 81,313 per kg on April 8, following a 7.19% increase in 2023. Year-to-date, silver has already gained more than 11%. Several factors contribute to this rise, including strong demand from industrial sectors such as electronics and solar, as well as its status as a safe-haven asset amid economic uncertainties. Geopolitical tensions since 2020 have added a risk premium to the market, with events like the Russia-Ukraine war, Israel-Hamas war and others boosting demand for silver as a secure investment. Additionally, robust industrial demand in areas like electronics, solar energy, and healthcare has further bolstered silver's price.

Silver's unique value lies in its ability to cater to two distinct yet interconnected markets:

Industrial Metal: Silver, an industrial metal renowned for its exceptional thermal and electrical conductivity, holds indispensable importance across various sectors. It serves as a vital component in electronics, including motherboards and electrical contacts, as well as in photovoltaics for solar panels and automobiles, encompassing batteries and electrical wiring. With rapid growth anticipated in these industries, particularly within the renewable energy sector, the demand for silver is expected to soar.

Global silver demand is forecast to reach 1.2 billion ounces in 2024, which, if achieved would be the second-highest level recorded. Stronger industrial offtake is a principal catalyst for the rising global demand for the white metal, and the sector should hit a new annual high this year. In line with the trend in recent years and the renewable energy related initiative, the photovoltaics (P.V.) (used for solar panels) and automotive industries will remain key drivers of growth this year.

Precious Metal: Silver maintains its classification as a precious metal, providing a safeguard against inflation and market instability. Amid economic turbulences, investors frequently seek refuge in precious metals such as silver to protect their assets.

India, the world's largest silver consumer, holds a pivotal position in the international silver market. Various factors contribute to the escalating domestic demand for silver:

Government Initiatives: The Indian government's emphasis on renewable energy and electric vehicles is poised to significantly bolster silver consumption in these sectors. Policies geared towards promoting solar panel installations and the adoption of electric vehicles are anticipated to fuel demand for silver as an industrial metal in the foreseeable future.

Increasing Affluence: As disposable incomes rise in India, there is a notable uptick in demand for silver jewellery and utensils, which have traditionally constituted a substantial portion of silver consumption in the country. With the expansion of the middle class, the demand for silver for ornamental purposes is forecasted to escalate further.

Rising Investment Awareness: Increased awareness among investors about alternative investment avenues such as silver could drive up silver purchases for portfolio diversification. With traditional asset classes like real estate and fixed deposits offering diminished returns, the potential for silver price appreciation may attract a greater number of investors. Additionally, silver serves as a hedge against market volatility.

Multiple Investment Options: Investing in silver has become more accessible in today’s times. While the traditional method involves physically purchasing silver, it entails certain risks. To mitigate these risks, investors can opt for investment avenues like Silver ETFs and Silver Futures, which offer dematerialized formats of investment that are safer and potentially more rewarding than traditional methods. This accessibility has also bolstered domestic investment in silver, thereby increasing its demand.