Silver prices in India witnessed a significant downturn on Thursday, plunging by Rs 21,600 per kilogram in the domestic market. The sharp decline was attributed to weak global cues and a strengthening US dollar, which exerted pressure on precious metals across the board.
Reasons Behind the Fall
The drop in silver prices mirrored the trend in international markets, where the metal saw a steep correction. The US dollar index climbed to a multi-month high, making dollar-denominated commodities like silver more expensive for holders of other currencies, thereby reducing demand. Additionally, uncertainty over the pace of interest rate cuts by the US Federal Reserve dampened investor sentiment towards non-yielding assets.
Impact on Domestic Market
In the Indian market, silver was trading at Rs 83,500 per kilogram on Wednesday before the plunge. The current rate now stands at around Rs 61,900 per kg, marking a substantial loss for investors. The fall also affected industrial demand, as silver is widely used in electronics, solar panels, and jewelry.
Expert Opinions
Market analysts suggest that the correction was overdue after a prolonged rally. According to commodity experts, the near-term outlook for silver remains bearish due to a strong dollar and expectations of higher-for-longer interest rates. However, some see this as a buying opportunity for long-term investors, citing silver's role in green energy transition and industrial applications.
Comparison with Gold
Gold prices also declined but at a slower pace, dropping by Rs 1,100 per 10 grams in the domestic market. The gold-silver ratio, which measures how many ounces of silver can buy one ounce of gold, widened, indicating silver underperformance.
Future Outlook
While the short-term trend remains negative, analysts believe that silver could rebound once the dollar weakens and global economic uncertainties rise. Investors are advised to monitor US economic data and Fed policy statements for further cues.
