Silver looks set to take over glitter from gold

Mumbai: Investors, who stocked up gold in their portfolios over the last two or three years as a safe haven asset, can now consider substituting a part of it with silver given its potential to outperform its bullion peer this year.

Silver’s relative underperformance to gold in the recent rally of both the precious metals and prospects of further gains in industrial metals globally could help silver gain as much as 15-20% from current levels, helping it cross the ₹100,000 per kilogram mark over a one-year horizon, said experts. The precious metal, also a key industrial input, is currently at ₹84,984 per kg on the MCX.

“We have a very strong bet that China will recover in the third quarter of 2024,” said Navneet Damani, group senior vice-president at Motilal Oswal Securities. “In the last three to five years, silver has moved more like an industrial metal than a precious metal, and once there is recovery in China, silver can also take off,” he said.

Silver prices could see an upside of 15-20% as against the 3-5% expected in gold, Damani of Motilal Oswal Securities said, recommending buying silver on dips of up to ₹80,000 per kg.

While both gold and silver hit their lifetime highs in the domestic market earlier in 2024, a key indicator shows that the prices of silver have not moved as much as gold.The gold-to-silver ratio is currently a little over 85, significantly higher than its historical range of 65-75. This means the value of 10 grams of gold is generally 65-75% of the value of a kilogram of silver. Given that gold is currently at 85% of the value of silver according to this parameter, silver is likely to notch up higher gains ahead, analysts said.While heightened volatility in India ahead of general elections, and likely easing of interest rates by the US Federal Reserve is expected to support prices of both gold and silver, the latter will have the added advantage of its various industrial applications. Silver finds usage in solar panels, electric vehicles, semiconductors, other renewable energy sources, and certain electronic and consumer durables.“Over the medium-to-long term, we are extremely bullish on silver, and we see silver outperforming in the long run because industrial demand will pick up, including from solar panel manufacturers and other green technologies,” said Tapan Patel, fund manager at Tata Asset Management. Patel suggests investors have a combination of both gold and silver in their portfolio given the current market environment. “If investors are looking at a 10-15% exposure to bullion, then 60-70% should be gold,” he said.

Given that silver has also not appreciated the way gold has in the last few years, and because of its higher applications, silver is bound to rise, and this could be higher than gold over a year, said Shashank Pal, the chief business officer at PL Wealth Management.