Overview
Silver prices have soared to a 12-year peak in both local and international markets. Experts predict further growth as gold prices climb and geopolitical tensions persist.
Silver Prices Surge to 12-Year High Amid Global and Domestic Market Factors
In recent days, silver prices have reached new heights, breaking the ₹1 lakh per kilogram mark in India and climbing to a 12-year high of over $34 per troy ounce internationally. Analysts expect silver’s upward trend to persist, closely mirroring rising gold prices. Commodity experts forecast that silver could approach its previous peak of nearly $50 an ounce, achieved in April 2011, and may reach $40 by year’s end.
Silver and Gold Price Movements
While gold prices have surged this year, silver has outperformed, narrowing the gold-to-silver price ratio. Year-to-date, gold has increased by around 32%, but silver’s growth of approximately 42% has outpaced it. Compared to stock market returns, which have been relatively subdued amid ongoing corrections, silver has proven to be a strong performer, climbing $10 an ounce since January.
Key Drivers: Geopolitical Tensions and Safe-Haven Demand
Silver’s price rally has been driven by several factors, including heightened geopolitical tensions in West Asia. Escalating conflict and Israel’s potential retaliatory actions against Iran have intensified the demand for silver, seen as a safe-haven asset similar to gold.
Impact of U.S. Federal Reserve Rate Cuts
Historically, bullion prices rise when interest rates fall due to an inverse relationship. With the Federal Reserve signaling an end to rate hikes and cutting rates by 50 basis points in September—the first reduction in four years—investment demand for precious metals like silver has increased as investors adjust their portfolios.
Chinese Economic Stimulus Fuels Commodity Demand
China’s recent economic stimulus measures have also had a notable impact on silver prices. The People’s Bank of China has rolled out multiple initiatives to boost growth, with more anticipated in the coming months. As China, a major silver importer, revives its economy, demand for silver, especially for industrial applications, could see a significant increase. China’s economic growth has historically influenced commodity prices, with its spending in 2011 also contributing to that year’s silver price spike.
Global Supply Deficit
Despite substantial global reserves of silver, supply has lagged behind demand for the past three years. The 2024 World Silver Survey reports a global market deficit of 184.3 million ounces in 2023, mainly due to high industrial demand and reduced mining output. The deficit is projected to widen to 215 million ounces this year. Declining production from major silver-producing countries, impacted by labor strikes and reduced ore quality, has exacerbated the supply shortage.
Rising Industrial Demand for Silver
Silver’s diverse industrial applications, particularly in the photovoltaic (solar) sector, have bolstered demand. In 2024, demand from this sector alone is expected to reach 232 million ounces, surpassing the demand for both silver jewelry and net physical investment. Silver’s role in electronics and green energy technologies has expanded, with the annual demand for electrical applications forecasted at 485.6 million ounces. The ongoing conflicts worldwide have also contributed to demand as silver is utilized in certain military technologies.
India’s Role in Silver Demand
India, though a minor silver producer, is a substantial consumer, primarily for jewelry and silverware fabrication and physical investment. In 2023, India’s demand for silver used in jewelry fabrication accounted for 41% of global demand for that purpose, while demand for silverware fabrication was 68% of global demand. However, high import duties and a weakening rupee have curbed demand recently. Although India’s physical investment demand remains relatively small globally, it still represents a sizable portion, with 2023 demand at 49.3 million ounces.
India’s significant demand has the potential to impact global supply and influence price movements. As geopolitical tensions, economic conditions, and industrial growth continue to shape the market, silver prices may remain volatile in the near future.