Silver prices are experiencing a notable surge, driven by a mix of macroeconomic trends and geopolitical developments. With forecasts suggesting that prices could soar to ₹1.17 lakh within the next year, this precious metal is capturing the attention of investors. Recent statistics reveal a 15% increase in 2024 alone, followed by an additional 11% rise anticipated in early 2025. Analysts from Emkay Wealth Management believe that silver will continue to be a strong contender in the market, bolstered by factors such as declining interest rates in the U.S., ongoing global uncertainties, and shifting trade policies.

The Influencing Factors Behind Silver’s Rise

As Apurva Sheth, the Head of Market Perspectives & Research at SAMCO Securities, points out, silver’s potential for growth is substantial, especially if the USD-INR exchange rate remains stable. He notes that silver has maintained a consistent trading pattern since 2017, with significant price jumps following previous breakouts. Given silver’s historical performance, Sheth suggests a target of ₹1.17 lakh over the next 12 months, highlighting that past trends indicate a 50% increase from prior peaks.

Medium to Long-Term Outlook for Silver

According to Emkay Wealth Management, several key factors will support silver prices in the medium to long term:

• Decreasing U.S. interest rates: Expected to decline gradually throughout 2025, significantly influencing the demand for precious metals.
• Geopolitical uncertainties: Continuing global tensions are likely to enhance safe-haven demand for silver.
• Evolving trade policies: Current U.S. trade strategies may further bolster investor interest in precious metals.

Sheth emphasizes that silver has outperformed the Nifty 50 Index since December 2022, with a remarkable 41% increase compared to the index’s 26% gain. He describes silver’s market behavior as following a “greed and fear” cycle every 28 months, with the current phase of greed expected to last until April 2025, historically yielding an average return of 108%.

Key Demand Drivers for Silver

The demand for silver is heavily influenced by multiple factors:

• Supply and Demand Dynamics: Silver has been in deficit for the last four years, with an estimated supply of 1,004 million ounces in 2024, against a projected demand of 1,219 million ounces.
• Industrial Usage: Approximately 60% of silver demand originates from industrial applications, including electronics, solar energy, and electric vehicles (EVs). The growing adoption of green technologies is anticipated to sustain strong industrial demand.

Technical Insights and Future Projections

Sheth notes that a weakening U.S. dollar is a favorable sign for silver prices. The U.S. Dollar Index (DXY) is currently forming a bearish head-and-shoulders pattern, which could lead to a decline towards the 100 mark, positively impacting silver’s value.

Moreover, the silver-to-gold price ratio is hovering close to multi-decade lows at 1.11%, indicating that silver has significant room for growth compared to gold. Technical analysis suggests that silver is gaining momentum, with prices aiming to breach the critical US$ 33 mark. Should this occur, projections indicate potential price movements to US$ 36.60, US$ 38.70, and even US$ 39.30.

Investing in silver-focused funds with a 12 to 18-month horizon could be a strategic decision for investors looking to capitalize on these trends. Additionally, the current gold-to-silver ratio, around 90, indicates that silver remains relatively undervalued, suggesting potential strengthening as the ratio moves back to its historical range of 50 to 70.

In conclusion, with silver’s current trajectory and the interplay of market dynamics, investors have compelling reasons to keep a close eye on this precious metal in the coming months.