Silver zooms past Rs 87,000/kg levels to mark ATH after record 20% gains this year

Silver prices in Thursday’s trade (May 16, 2024) surpassed Rs 87,000 per kg levels on the MCX to mark an all-time high driven by a weaker dollar and declining treasury yields. In the futures market, Silver July contract scaled to new all-time high price of Rs 87,476 per kg levels, while at the time of writing this copy it traded higher by 0.47 per cent or Rs 409 at Rs 87,274. 

Silver has scaled $30 levels in the international markets for the first time in eleven years.

“The uptick in silver prices followed reports of slowing US inflation, fueling expectations of a Federal Reserve interest rate cut in September,” said Jateen Trivedi- VP Research Analyst - Commodity and Currency, LKP Securities.

Hareesh V, Head of Commodities, Geojit Financial Services said the swift rise in silver prices is primarily due to its unique industrial properties, which set it apart from gold. Key industrial metals like Copper, Aluminium, Zinc, and Lead prices have risen sharply since April on worries over supply threat. This has prompted speculators to bet largely on silver. In addition, record high gold prices, escalating geopolitical tensions and hopes of US interest rate cuts also aided the sentiments.

Demand for silver remains robust, especially in the electric vehicle (EV) and photovoltaic sectors, as consumption for EVs continues to rise, contributing to the bullish trend in silver markets, Trivedi added.

Dollar index (DXY) is at a 5-week low and last traded at 104.46, up by a marginal 0.11 per cent, while the 10-year bond yield hovers near one-month low and fell to 4.3 per cent. The precious white metal has recorded a stupendous run of 20 per cent so far this year.

Outlook for silver prices

The ongoing momentum-driven buying is likely to extend in the immediate run driven by a robust rally in gold and other industrial metals. Expectations of interest rate cuts, escalating geopolitical tensions, and enduring inflation concerns could help prices stay firm in the immediate run, added Hareesh V.

The expert advises investors to add silver to their portfolio but that should be limited to below 5 percent. Periodic buying in small quantities is advised for greater benefits. Investors should also consider that silver prices can be highly volatile due to speculation, which can lead to short term price surges. Silver is one of the most volatile precious metals and its volatility can be twice or thrice greater than gold in some days, he adds.