The silver market in India witnessed a significant uptick on Thursday, with futures contracts trading sharply higher on the Multi Commodity Exchange (MCX). The precious metal's price movement has captured the attention of investors and traders, prompting analysis of the underlying factors and future trajectory.
Sharp Rally in Silver Futures
Silver futures for July 2024 delivery on MCX were trading at ₹84,600 per kilogram, marking a substantial gain of ₹1,170 or 1.40% from the previous close. This positive momentum was not isolated to the domestic market. Internationally, spot silver on the COMEX also saw a rise, trading at $28.50 per ounce. The synchronized movement highlights the global factors influencing the precious metals complex.
The trading session on Thursday, May 30, 2024, saw silver open at ₹83,850 per kg, after closing the previous day at ₹83,430. The intraday range was notable, with the price hitting a high of ₹84,699 and a low of ₹83,601. This volatility underscores the active trading and shifting sentiment surrounding the commodity.
What's Driving the Silver Price Surge?
Market analysts point to a confluence of factors propelling silver prices upward. A primary driver is the weakness in the US Dollar Index (DXY), which makes dollar-denominated commodities like silver cheaper for holders of other currencies, boosting demand. Concurrently, a dip in US Treasury bond yields has reduced the opportunity cost of holding non-yielding assets such as precious metals.
Furthermore, silver benefits from its dual identity as both a precious metal and a crucial industrial commodity. Its extensive use in solar panels, electronics, and the automotive industry provides a strong demand floor. This industrial demand, coupled with its traditional safe-haven appeal during economic uncertainty, creates a unique value proposition. Geopolitical tensions and persistent global inflation concerns continue to support investment demand for tangible assets.
Should You Invest in Silver Now?
The recent rally naturally leads to the question of whether it presents a good entry point for investors. Experts advise a measured approach. While the short-term technical and fundamental backdrop appears supportive, investors should consider their financial goals and risk appetite.
Silver is known for its higher volatility compared to gold, which can lead to sharper price swings both upwards and downwards. For long-term portfolio diversification, a strategic allocation to precious metals can be prudent. However, timing the market is challenging. Financial advisors often recommend systematic investment plans (SIPs) in silver ETFs or sovereign silver bonds to average out costs rather than making a lump-sum investment at a specific price point.
The outlook remains cautiously optimistic, contingent on global macroeconomic data, central bank policies (particularly the US Federal Reserve's stance on interest rates), and currency movements. Investors are advised to stay informed and consult with financial experts before making significant allocation decisions in the commodity space.
