The silver market is witnessing a historic rally that has stunned investors and analysts alike. The white metal has skyrocketed by an astonishing 125% so far this year and is on track to deliver its best annual performance in nearly five decades. In a landmark moment last week, silver futures on the Multi Commodity Exchange (MCX) breached the ₹2 lakh per kilogram level for the very first time.
What's Fueling the Meteoric Rise of Silver?
This extraordinary surge has even outpaced the strong rally in gold, which has gained about 65% on a year-to-date basis. According to Rajkumar Subramanian, Head of Product & Family Office at PL Wealth, silver is evolving beyond a traditional hedge. "While gold remains the primary hedge for Indian investors, silver is increasingly behaving like a leveraged play on both global growth and the energy transition," he explained. Its unique identity as both a monetary and industrial metal makes it highly reactive to changes in interest rates, the US dollar, and manufacturing activity.
The core of the rally lies in a severe demand and supply imbalance, compounded by an inventory squeeze. On the supply side, global mine production has stagnated, hovering around 810 million ounces (Moz), a figure that has shown little to no growth over the past five years. The secondary supply from scrap recycling has also failed to rise enough to bridge the gap, effectively capping total supply below 1 billion ounces.
Conversely, demand is soaring. Data from Refinitiv indicates that the silver market is expected to remain in a supply deficit through 2026, with an estimated shortfall of 112 Moz. Subramanian highlights that India's clean-energy and manufacturing initiatives are structurally boosting silver consumption in sectors like solar panels, electric vehicles (EVs), and electronics.
Adding fuel to the fire, silver's recent inclusion in the US Geological Survey’s list of critical minerals has sparked speculation about possible future import tariffs. NS Ramaswamy, Head of Commodity & CRM at Ventura, underscores silver's pivotal future role. He states it is poised to be a "next generation metal" essential for the green energy transition and digital transformation, thanks to its growing use in AI, data centres, electronics, and alternative energy.
How Can Investors Identify a Potential Peak?
Analysts believe both gold and silver have room to grow in the near to medium term, supported by a weaker dollar, expectations of interest rate cuts, and sustained demand. However, experts advise investors to monitor specific signals that could indicate the rally is nearing its peak.
1. Supply Finally Meets Demand: Ramaswamy cautions that while silver could potentially rally to $100 an ounce (approx. ₹3 lakhs/kg), history shows that epic rallies can be followed by sharp declines. He identifies the key signal for "peak silver" would be when supply eventually catches up with the rampant demand.
2. The Gold-Silver Ratio (GSR): Satish Dondapati, Fund Manager – ETF at Kotak Mutual Fund, suggests watching the GSR, which measures how many ounces of silver it takes to buy one ounce of gold. The current GSR is around 67.40, its lowest since May 2021. A falling ratio means silver is outperforming gold, a trend typical in the later stages of a bull market.
"The gold–silver ratio is close to its long-term average, which supports further upside, but if it falls toward the historical 60–62 range, it may trigger sharper price swings and higher volatility as silver’s outperformance becomes stretched," Dondapati warned. This ratio can serve as an early warning for when the rally might lose momentum.
Market Pulse and Outlook
In recent trade, MCX silver prices saw a minor correction, trading down 0.4% at ₹197,114 per kilogram. The overarching narrative, however, remains one of a metal being pulled in two powerful directions: its timeless appeal as a store of value and its exploding indispensability in the technologies of the future. For investors, understanding this dual dynamic and the signals of a potential top will be crucial in navigating this volatile but rewarding market.
Disclaimer: This analysis is for educational purposes only. The views expressed belong to individual analysts. Investors are strongly advised to consult certified experts before making any investment decisions, as market conditions are subject to rapid change.
