Silver to outshine gold in new year, says report

The Samvat that has ended was good for both gold and silver, where the return was 21.3 and 22.4 per cent, respectively. However, with high prices, demand this Dhanteras and Diwali took a hit.

According to the Indian Bullion and Jewellers Association, demand shrank this time to 30 tonnes, from 40 tonnes last year, despite some pick-up in the past week.

In the new year, silver is expected to glitter more than gold. According to global research agency Metal Focus, while the average price of gold will rise eight per cent in the year, to $1,520 an oz, “silver is projected to see a stronger 14 per cent lift, to $18.5 an oz, although this will only represent a six-year high”.

Neil Meader, its research and consultancy manager, said: “The macro economic backdrop will become increasingly favourable for investment in gold in the coming months. This includes an end to sustained dollar strength, further rate cuts by the Fed (the US central bank), more accommodative monetary policies from other major central banks and the continued rise of negative-yielding debt.”

He also cautioned: “In spite of growing risk aversion this year, equities have remained near all-time highs and, seemingly, most investors are still not betting on a sustained correction.” He feels this investor sentiment will eventually change in favour of defensive assets, including gold.

Silver follows wider fundamentals, as 55 per cent of its buying is for use by other industries. Hence, Metals Focus believes a global economic slowdown and its negative impact on base metal prices will weigh on silver over the next 12 or so months. Still, says Meader, silver has significantly underperformed in recent years, compared to its all-time high, and hence, “on balance, silver is likely to benefit more from rising investment inflows into gold”.

Adding: “In early September, gold was only 12 per cent below its all-time high, while silver remained far below its $50 peak. Given silver ’s higher volatility, this leaves room for silver to outperform gold.”

Silver production is again expected to reach its previous peak and supplies will be higher. Its industrial demand and jewellery offtake are both forecast to post small gains over 2019-20.

In this country, silver has been a preferred asset for traders and stockists. Chirag Thakker, director of the Amrapali Group in Gujarat, among the largest silver importers in India, says: “If we compare gold to silver in India, silver ’s market demand has recovered faster, in terms of discount to premium (in the past few months). It will surely perform better this year, as consumption has increased in industrial usage. Silver jewellery demand is also set to grow much faster than gold, as silver prices have bigger room to appreciate.”