Gold, silver rates hit record highs. 6 key factors why silver price can climb to ₹1,00,000 peak on MCX?

Gold and silver prices have surged to unprecedented highs, driven by a broader rally across commodity markets, with both precious and base metals witnessing strong buying momentum. On the Multi Commodity Exchange (MCX), gold has reached an all-time peak, trading around ₹76,000 per 10 grams, while silver hovers near ₹92,000 per kg. As investors flock to safe-haven assets, a key question emerges: Will silver soon breach the ₹1,00,000 mark?

Market analysts expect silver prices to move toward this significant psychological milestone soon on the back of several catalysts supporting the white metal.

On MCX, gold price was flat at ₹75,295 per 10 grams, while silver prices traded 0.56% higher at ₹92,556 per kg. In the international market, Spot gold was up 0.2% at $2,661.25 per ounce after hitting a record high of $2,670.43 on Wednesday. US gold futures were steady at $2,684.50. Spot silver was steady at $31.85 per ounce.

“Comex silver prices have appreciated by more than 34% year-to-date (YTD), outpacing comex gold which has gained by 29%, led by a weak US dollar, rise in the geopolitical risks, safe-haven appeal, industrial usage and rising jewelry demand which all played as the catalyst for the rally in the silver,” said Jigar Trivedi, Senior Research Analyst – Currencies & Commodities, Reliance Securities.

In the domestic market, MCX silver rate is up more than 24% year-to-date (YTD), outperforming the gold prices that rallied over 20%.

“MCX Silver December is hovering around ₹92,000 per kg and we don’t deny the possibility of a MCX silver price hitting a six digit figure by the time the year 2024 ends. Comex silver is all set to hit $33 – $35 per ounce in the next four to six months. Hence the outlook is bullish,” Trivedi said.

Here are some key factors that can support silver prices towards ₹1,00,000-mark.

Interest rate cuts

The US Federal Reserve delivered a sharper-than-expected 50 basis points (bps) interest rate cut in its September meeting, and FOMC members have since noted that the quick deterioration of the labor market’s resilience and softening inflation are likely to warrant more loosening in coming decisions.

Hopes of further steep rate cuts have driven silver prices above $31 per ounce in the international market, pushing them to their highest levels since 2012. This surge is expected to influence domestic silver prices as well, which are likely to track the gains in COMEX silver, maintaining strong upward momentum.

China stimulus measures

China, a major consumer of commodities, has unveiled its most aggressive stimulus measures since the COVID-19 pandemic to revive its economy. This move is expected to boost demand for industrial commodities, including silver, which not only serves as a precious metal but also plays a key role as an industrial metal.

PBOC’s monetary stimulus package for the Chinese economy supports the outlook for further investment in silver-intensive green technologies, mainly solar panel production, according to Trivedi.

EV, Green Energy

The growing EV market, projected to expand at a 21.7% compound annual growth rate (CAGR) from 2023 to 2030, is driving up demand for silver. Each EV requires 15-30 grams of silver. Additionally, silver demand is rising due to green energy technologies like solar panels and wind turbines. According to the International Energy Agency (IEA), global renewable capacity is expected to increase by 50% by 2030, further bolstering silver’s industrial demand, noted Ajay Kedia, Director of Kedia Advisory.

Rising Jewelry Demand, Declining Production

Jewellery and silverware accounted for 20-30% of total silver demand in 2023, with growth expected to continue, leading to a potential 5-10% YoY increase in 2024 as discretionary spending rises.

On the other hand, global mine production is expected to fall by 0.8% to 823.5 Moz in 2024, with Peru facing mine closures. Environmental regulations in Mexico are slowing new projects, exacerbating supply constraints for silver, Kedia noted.

Gold-Silver Ratio

The Gold-Silver ratio, currently at 84, tends to rise during economic uncertainty or expansionary policies like rate cuts and monetary easing. In the short term, it may remain above 80, however, as interest rates fall and industrial demand for silver increases, the ratio could narrow to 70 or 60 over the next 12-14 months, provided industrial recovery strengthens and inflation under control, Kedia said.

A falling Gold-Silver ratio typically indicates that silver prices are rising relative to gold prices or silver is expected to outperform gold.

Technicals

According to Kedia, silver is showing a positive trend on the hourly timeframe, with prices trading above the 50-day moving average. This indicates bullish momentum, suggesting the potential for further upside in the short term.

“Traders may find opportunities to go long, especially on pullbacks near support levels. The current positioning above the 50 MA reflects strong buying interest and a likely continuation of the upward move, barring any sudden reversals,” Kedia said.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.