Mumbai — In a historic milestone, silver prices on the Multi Commodity Exchange (MCX) reached over Rs 100,000 per kilogram on Wednesday, marking a significant moment for traders and investors alike. The December futures contract for silver hit an all-time high of Rs 100,081/kg, though it later settled at Rs 99,000/kg.
Spot Market Trends
In the local spot market, particularly in Mumbai’s Jhaveri Bazaar, silver was trading at Rs 98,862/kg. This remarkable rise has resulted in a substantial return of approximately 40% in the current Samvat 2080.
The global market also reflects a surge in silver prices, with trading at $34.58 per ounce—the highest level in 12 years. The all-time peak for silver internationally was recorded at $49.84 per ounce in April 2011.
Shifting Demand Dynamics
Despite the optimistic outlook among investors, the demand for silver in the jewelry market remains subdued. With a Goods and Services Tax (GST) of 3%, the effective price of silver reaches around Rs 1,02,000/kg in India. Notably, there is a noticeable shift in demand from traditional jewelry to industrial applications, particularly in sectors such as electronics and solar energy.
Surendra Mehta, National Secretary of the Indian Bullion and Jewellers Association, commented on the current market dynamics: “Investment demand has been robust even at these elevated prices, but the jewelry segment is becoming less significant in influencing overall demand for silver.”
Bullish Market Sentiment
Anuj Gupta, Head of Commodity and Currency at HDFC Securities, noted that despite the high prices, market players continue to increase their bullish bets on silver. In October, silver futures prices rose by 9.58%, while open interest across all silver contracts grew by nearly 20%. The open interest figures increased from 202,000 lots at the start of October to 242,000 lots by October 22.
Gupta highlighted that a significant portion of this demand is driven by small and retail investors, as evidenced by the rise in silver micro contracts.
Influencing Factors
Chirag Sheth, Principal Consultant at Metal Focus, an international bullion research firm, identified several key factors driving the silver rally. “The change in stance from the US Federal Reserve, combined with ongoing geopolitical issues, is propelling both gold and silver prices upward,” he explained. Additionally, industrial buying—especially from solar panel manufacturers—has provided crucial support for silver, allowing it to appreciate at a faster rate than gold.
The gold-silver price ratio, which had previously been above 80, has now fallen below 79 to 78.8. This decline signifies that silver prices are rising more rapidly than gold in recent weeks.
Future Projections
Looking ahead, Sheth predicts a potential return of 25-30% for silver over the next 2-3 years. While he anticipates short-term volatility due to profit booking, he maintains a price target of $43 per ounce within that timeframe.
Despite rising prices, silver imports have remained strong. The price increase did not deter import activity, particularly following a 9% cut in silver import duties in July 2023.
In August, silver imports soared to one of the highest monthly totals, reaching 1,421 tonnes, with 941 tonnes imported in September. Over the first nine months of 2024, total silver imports amounted to 7,090 tonnes—more than double the total imports for all of 2023, which stood at 3,475 tonnes, according to Metal Focus data.
Conclusion
The recent surge in silver futures prices to over Rs 100,000/kg reflects a complex interplay of investor sentiment, industrial demand, and global market dynamics. While the shift in demand from jewelry to industrial applications poses challenges for the traditional market, the overall outlook for silver remains bullish. As investors continue to navigate these changing conditions, silver is poised to maintain its significance as a valuable asset in the coming years.
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