Gold vs Silver buying: Silver presents an attractive option for aggressive investors seeking portfolio diversification and alpha generation beyond traditional equities, believe analysts. Despite the recent surge in domestic prices, which saw silver reach the Rs 1 lakh per kg mark, analysts suggest that investors consider allocating 3-5% of their portfolio to the white metal by buying on dips over the next 1-3 months.
Since the beginning of the calendar year 2024, silver has experienced impressive gains, rising by 33.65% to touch the Rs 1 lakh per kg mark.In the past month alone, it has gained 12.5%, outperforming the Nifty 50 index, which returned 12.5% during the calendar year but lost 5.6% over the past month.
In dollar terms, silver’s performance has been even more remarkable, with gains of 47.25% and 13.56%, respectively, over the same periods.
Vishnu Kant Upadhyay, AVP-Research and Advisory at Master Capital Services, attributes the increasing market value of silver to its extensive use in various industries.
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“Silver is extensively utilised in electronics, solar panels, batteries, and increasingly in semiconductors, making it a critical component in modern technology. The growing industrial demand for silver along with the anticipation of another rate cut by the Federal Reserve is causing an increase in the metal’s market value,” he told ET.
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Manav Modi, a bullion analyst at Motilal Oswal Financial Services, highlights the factors supporting silver prices, including “Rising industrial demand, high domestic imports, ETF buying by investors and Fed rate cuts have been supportive for silver.”
While acknowledging the possibility of profit-booking following the sharp rally, Modi advises investors to view major dips as buying opportunities. He projects that silver could reach Rs 1.25 lakh per kg over the next 12 months.
As advancements in technology continue and the need for electronic devices and semiconductors grows, the demand for silver is expected to remain strong, leading to a sustained upward trend in prices.
Bhavesh Jain, co-head of Hybrid and Solutions Funds at Edelweiss Asset Management, stated, “Silver has seen a strong long-term bullish break; the trend could likely continue supported by lower rates for longer and the revival in Chinese industrial activity.” Jain suggests that investing in silver ETFs is a more convenient option for investors compared to purchasing physical silver.
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However, some fund managers believe that the long-term prospects of silver will be influenced by the adoption and adherence to climate change and green technology initiatives by major global economies.
Vikram Dhawan, head of commodities and fund manager at Nippon India Mutual Fund, explained, “If investors believe in Earth’s rising temperature problem and its consequences, silver can serve as a proxy hedge.”
Nirav Karkera, head of research at Fisdom, advises, “Aggressive investors could buy on every fall and allocate 5-15% of their portfolio to the white metal.”
Dhawan pointed out that in the short term, silver prices may be affected by a Republican victory in the US, as Donald Trump is not known for his environmentalist stance and instead favors fossil fuels.
Considering the anticipated volatility, the upcoming US elections, and uncertainty regarding further rate cuts by the Federal Reserve, wealth managers recommend that investors consider staggering their silver purchases.