Spot prices of silver have been flat even after two months of unlocking. Analysts are divided on the outlook for and near-term price movement of silver.
The white metal is trading in a tight range of Rs 66,000-67,000 a kg, about Rs 11,000 down over its all-time peak hit in August 2020. In fact, the prices have declined over Rs 5,000 a kg in the spot market, compared with the peak prices in June 2021.
Anuj Gupta, Vice President (Commodities), IIFL Securities, said silver is trading lower due to low physical demand and diminished investment demand as traders and investors are moving towards equity market and IPOs amidst the current euphoria.
Kshitij Purohit, Lead Commodities & Currency at CapitalVia Global Research, said as equity markets recovered from lows, the safe-haven appeal of silver diminished.
This is the sign of the reflation trade, which is not good for silver also despite a pullback in the US dollar from its highest level since the start of the year, he said.
On the global front, investors are keenly tracking the stance of the US Federal Reserve on tapering. Back home, traders are waiting for the festive season to revive demand till the end of the year.
“The Federal Reserve’s ‘transitory inflation’ view is negative for an inflation-hedge like silver, but accommodative monetary policy in that scenario would support silver,” Purohit said.
“Festival demand will give support to the silver further,” said Gupta. “The forthcoming festival demand in the country may support the silver prices. Industrial demand may also support silver prices in the near future,” he said.
Market watchers have varied opinions of the bullion as tepid physical and industrial demand is dampening market sentiments. However, they are positive on silver in the longer run, and advise investors to buy the corrections despite the gloomy outlook.
Gupta said investors can buy or accumulate silver on dips. He is positive on it for the long run and expects it to test Rs 75,000-80,000 levels by the end of this calendar.
Purohit is bearish of silver and expects the precious metal to remain under pressure. He said investors shall wait for further correction and accumulate the silver in the range of Rs 60,000-62,000 before Diwali.
Investors can start accumulating the silver near these levels, with a target of Rs 75,000. He suggested a stop loss of Rs 58,500.
