Silver prices have experienced a dramatic decline, falling more than 40% from their January peak of over ₹4 lakh per kg on the Multi Commodity Exchange. According to reports from The Times of India, silver was trading at ₹2.35 lakh per kg in Mumbai's spot market earlier this week. Despite this significant price correction, investment demand for silver exchange-traded funds (ETFs), bars and coins has weakened substantially, with investors who bought at higher prices now sitting on substantial losses and remaining hesitant to make fresh purchases.
The weak demand situation is creating inventory problems for domestic players. As reported by The Times of India, Indian bullion dealers and refiners have placed orders for around 2,000 tonnes of silver, which is currently in transit. This additional supply has raised concerns over further build-up in stocks, particularly as India imports around 7,000 tonnes of silver every year. James Jose, president of the Precious Metals Refiners Forum, noted that refiners and bullion dealers are facing problems both internationally and domestically due to the lack of new investors and no immediate signs of price recovery.
The outlook for industrial demand is adding to the pressure, with consumption expected to weaken. According to Chirag Sheth, global business head of Public Gold Bullion (SG) Pte, quoted by The Times of India, silver prices are unlikely to cross $100 per troy ounce immediately unless the US-Iran war comes to an end. The continuous war between the US and Iran has impacted the solar industry, semiconductor industry and EV industry where silver is used. Carsten Menke, head of Next Generation Research at Julius Baer, noted that a shift to cheaper alternatives such as aluminium and copper has started, and the growth outlook for Chinese solar module makers, which are the biggest industrial users of silver, is not as strong anymore.
Despite the sharp fall, some long-term investors are once again looking at silver as a portfolio diversification tool. As reported by The Times of India, Nilanjan Dey, partner at Wishlist Capital, suggested that investors with a time horizon of five years or longer may consider buying silver ETFs in a staggered manner instead of putting in a large amount at once. Monthly or fortnightly investments could help spread out the purchase price and reduce the impact of short-term price movements. However, Dey warned that investors with shorter investment horizons should not assume that the recent decline automatically makes silver an attractive buying opportunity.
