Will silver prices cross Rs 1 lakh per kg post June 4 election verdict? A perfect storm is brewing

Silver prices have been subject to significant fluctuations over the past few quarters due to a complex interplay of factors.  These include economic data points, geopolitical tensions, and market-specific dynamics. On the MCX, it has already surpassed 94,000 on May 22, 2024.

While the silver market has experienced significant fluctuations in recent quarters, it’s important to note that the silver price has almost doubled over a decade. This steady rise in silver prices on the international market has reached a three-year high, while on the local market, it has reached new all-time highs, indicating a stable and promising trend.

Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, says, “Election outcomes do not directly influence silver prices, though fluctuations in the rupee can impact domestic prices. Overall, the trend for silver remains bullish, and reaching the Rs 1 lakh mark is expected in due course. Given the current volatility and the upcoming FED policy decision in June, Silver has no immediate triggers to hit new highs within the next week. However, investors should maintain a long position and consider buying on dips, expecting prices to reach Rs 1 lakh within the next 2-3 months.”

Silver prices are soaring because of certain factors. For instance, high gold prices drive the entire precious metals market. Geopolitical tensions, the possibility of the Fed cutting interest rates later this year, and the continuous surge in deposits made by central banks fuel this.

Colin Shah, MD, Kama Jewelry, said, “Silver prices have outperformed gold this year, gaining about 18% year-till-date (YTD). In addition to being a precious metal, having ornamental value, silver is also considered as an industrial metal. Silver is an imperative raw material  in electric  vehicles,  solar panels, and 5G antennas, among other products that are expected to drive the global economy in the coming years, supported by a constant rise in demand. Fuelled by the on-going geopolitical tensions, economic uncertainty, higher inflation, anticipation of rate cuts coupled with robust industrial demand, silver prices are increasingly gaining momentum from the past few days. Going ahead, given its hybrid nature of being a precious and an industrial metal, a robust rally seems to be in the foresight, with a possibility to breach Rs 1,lakh mark by the end of 2024 supported by the ongoing circumstances.”

Silver’s story goes beyond just following gold. It is also a crucial industrial metal, especially in the renewable energy sector. The Silver Institute reports a significant jump in silver demand for photovoltaics (solar panels) in 2023, which is expected to continue.

According to the International Energy Agency, experts believe solar energy will play a much bigger role in the global energy mix by 2028. This means an even greater demand for silver in solar panels is yet to come. The challenge here is that the supply isn’t keeping up. While manufacturers have reduced silver use in solar cells, the next generation of panels requires more silver paste. This imbalance and rising industrial demand for electric vehicles and other applications suggest a potential silver deficit in 2024.

A combination of high gold prices, strong industrial demand, and the booming solar energy sector are creating a “perfect storm” for silver prices.

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