Silver shines on fresh demand outlook, but gold glitters brighter

Growth in electric vehicles and 5G tech will also buoy industrial demand for silver.
Growth in electric vehicles and 5G tech will also buoy industrial demand for silver.


In the domestic market, spot silver price rose by 9% so far in 2022, while gold is up by 13%.

For yet another year, silver’s performance versus gold has not been quite impressive. In the domestic market, spot silver price rose by 9% so far in 2022, in comparison, gold is up by 13%. (See chart)

The demand outlook for silver is poised to improve aided by the ongoing pick-up in green energy initiatives, globally. Silver is a precious metal and has industrial uses. Also, the increasing traction for electric vehicles and 5G technology would buoy industrial demand for silver.

Graphic: Mint
View Full Image
Graphic: Mint

You might also like 

Why IT attrition is high despite a risk of recession

Textile companies on long road to recovery

Next CEO must understand Ujjivan objectives: Ghosh

However, a bigger catalyst for silver demand and prices is the reopening of the Chinese economy. “For silver, it has been observed that it rallies when base metals rise due to industrial uses. China reopening will be a big game changer for silver," said Navneet Damani, senior vice president, currency and commodity, Motilal Oswal Financial Services Ltd.

From its recent lows, silver prices have recovered, but is far from shining. “Silver is undervalued for quite some time now. According to the Silver Institute, silver’s global supply would lag its demand in 2022, so a significant deficit has reignited buying interest in silver in the last few months and bodes well for prices, in the medium to longer term," Sugandha Sachdeva, a commodity market expert, said.

However, if silver manages to decisively breach $30 an ounce levels in the global market, then a steep upside momentum is likely in 2023, she added. In the international market silver is currently trading at $23.5 per ounce. Furthermore, the gold-silver ratio, a metric that bullion investors commonly track, has moderated. It is now hovering around the 76 mark after correcting from its recent peak levels of around 96. This ratio measures the relative strength of gold versus silver prices. When the ratio is high, the consensus is that silver is favoured because the latter is undervalued, so it should start catching up, said Sachdeva. “That said, to outperform gold, especially with the global recession fears still looming, it will be challenging for silver," she added.

But, while interest rate hikes dampen demand for a non-interest-bearing commodity like gold, when recession fears play out, then investors typically prefer betting on gold as a safe haven asset than silver. Two, recession will mean subdued business conditions, which is a setback for silver’s industrial demand.

Meanwhile, the domestic market, may see silver prices touch 74,000 a kg in Q1CY23 and 85,000 per kg at the end of CY23, from the current 67,000 per kg levels. The increase in prices will, however, be accompanied with some corrections in between, Damani said.

Elsewhere in Mint

In Opinion, Pradeep S. Mehta argues that courts should consider economic impact of verdicts. Himanshu tells why we have been unable to double the income of farmers. Pankaj Mishra says 2022 was the year of the Left's global revival. Long Story looks back at 15 stories that captured 2022 trends.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.