MS. CHANIKA GOEL
Assistant Professor
For as long as silver has been valued as a store of wealth—five millennia—it has also been utilized to make jewellery and other valuable items. But silver’s value decreased in relation to gold as its supply rose relative to gold. By 1600 BC, silver was said to be so readily available that its price had dropped to half that of gold. These days, the price of an ounce of silver is just over 1% that of gold.
Silver’s many industrial, medical, and technical applications are now supported by its distinctive qualities as a valuable metal and its accessibility. This distinguishes silver from gold as a valuable investment since it makes silver a necessary metal for the modern age.
We, at JIMS Kalkaji, tries to teach our management students how to diversify their investment portfolio and learn the art of wealth management, investing in silver can be an intriguing option for the same.
Several factors have contributed to an increase in silver prices in 2024:
- Economic Recovery: As the world economy continues to recover from the COVID-19 pandemic’s effects, more industrial activity may raise demand for silver across a range of industries, including renewable energy, electronics, and autos.
- Inflation Concerns: Extended monetary policies and supply chain disruptions may cause investors to seek for inflation hedges such as silver, which would increase the metal’s demand and price.
- Geopolitical Tensions: Increasing geopolitical tensions or wars in important areas that produce silver might cause supply chains to break down and limit the amount of silver available, which would raise prices.
- Green Energy Initiatives: As a result of governments’ pledges to transition to a green energy economy and their investments in renewable energy infrastructure, silver prices may rise due to increased demand, especially for solar panels and electric cars.
- Currency Devaluation: As a result of debt monetization and monetary easing, fiat currencies may continue to weaken, which might force investors to turn to hard assets like silver for safety. This would raise demand and drive up prices.
- Speculative Activity: Reduced interest rates, abundant liquidity, and algorithmic trading may stimulate more speculation in commodity markets, which may result in brief price increases for silver.
- Supply Constraints: Any interruptions to silver mining activities, such as work stoppages, governmental problems, or the depletion of resources, may limit the supply of silver and raise prices.
- Investor Sentiment: Concerns about the sustainability of traditional financial assets, growing knowledge of silver’s industrial applications, and its historical usefulness as a store of wealth might all contribute to positive investor sentiment toward the metal and raise demand and prices.
- Infrastructure Spending: Government stimulus plans and large-scale infrastructure projects might increase demand for silver, especially in the building and infrastructure development sectors.
- Market Volatility: Increased market volatility may prompt investors to seek out safe-haven assets like silver, which would raise the metal’s price. This volatility is caused by variables such as interest rate swings, geopolitical events, and regulatory changes.
Individually or in Combination, the above stated factors have led to an upside trend in silver prices in the present year. However, the silver market can be influenced by several unpredictable reasons, and prices can be volatile in the short run.
Studying the silver prices for the last five years to get the insights of the trends and factors affecting the market. The silver price movements from the year 2019 to 2023 are summarised below:
1) 2019:
- Trend: Silver prices started the year around Rs. 40600 per kg and experienced some volatility throughout the year.
- Factors: Economic uncertainty, trade tensions between the US and China, and expectations of monetary policy easing by central banks contributed to fluctuations in silver prices.
- Volatility: Silver prices peaked around Rs. 49700 per kg in September but experienced a downturn towards the end of the year, dropping below Rs. 42000 per kg. (Approx values)
2) 2020:
- Trend: Silver prices surged during the first half of the year, reaching a peak above Rs. 78000 per kg in August.
- Factors: The COVID-19 pandemic led to widespread economic disruption and uncertainty, driving investors towards safe-haven assets like silver and gold.
- Volatility: Silver prices experienced significant volatility, with rapid price movements in response to changing market sentiment and macroeconomic indicators.
3) 2021:
- Trend: Although silver prices declined from their 2020 highs, they were still comparatively high when compared to levels prior to the epidemic.
- Factors: Concerns about inflation, vaccination distribution, and economic recovery all had an impact on silver prices. The growing use of renewable energy technology bolstered demand for silver as well.
- Volatility: Silver prices showed some swings in response to changes in investor sentiment and economic data, however they were not as turbulent as they had been the year before.
4) 2022:
- Trend: Early in the year, silver prices saw some modest improvements, helped by the ongoing economic recovery and inflationary pressures.
- Factors: Geopolitical tensions, supply chain disruptions, and inflation concerns all remained. In contrast to the prior year, the rate of price increases did, however, slow down.
- Market Sentiment: Although less speculatively than in the prior year, investor sentiment toward silver remained strong.
5) 2023:
- Trend: Compared to other years, the price of silver moved very little and primarily in a sideways direction.
- Factors: Inflationary pressures subsided in certain areas, and economic development stabilized. Ongoing supply chain interruptions and geopolitical unpredictability, however, helped to support silver prices to some extent.
- Consolidation: For the most part of the year, silver prices stayed range-bound, settling into a more constrained price range than in prior years.
- Investor Behaviour: Trader activity and speculative interest declined in contrast to the increased investor interest in silver as a portfolio diversifier during the peak of the pandemic.
Due to a confluence of market, geopolitical, and economic variables, silver prices have generally fluctuated significantly during the past five years. When the COVID-19 epidemic peaked in 2020, silver prices spiked to multi-year highs; however, as the economy recovered and investor mood changed, silver prices moved more moderately in the years that followed.
Investors should carefully consider their time horizon, investment goals, and risk tolerance before purchasing silver or any other asset. Investing in silver carries some risks that can be reduced by diversifying across a variety of asset classes. Furthermore, investors can make well-informed investment decisions by consulting with financial advisors or carrying out in-depth study.
