Is it silver’s time to shine brighter than gold?

By Biman Mukherji

Often called the poor man’s gold, it may soon be silver’s time to shine brighter for hordes of investors.

While turbulent equity markets, geopolitical tensions and expectations of a U.S. Federal Reserve rate cut has driven up gold to six-year highs internationally and all-time highs in India recently, silver has lagged unusually behind though the two precious metals traditionally rise hand-in-hand.

That has resulted in the price ratio between gold and silver shoot up to above 90, which is more than a quarter century high and a strong indication of potential investment demand. 

The skewed price ratio has come about as silver, which has wider industrial applications than gold, has tended to behave more in line with industrial metals like copper and aluminium that have been affected by US-China trade tensions.But its unlikely that the price distortion will remain so distorted.

“The way gold is going up, silver will catch up sooner than later,” says Gnanasekhar Thiagarajan, director at Commtrendz Risk Management. 

Gold prices are currently at around $1,425/troy ounce internationally and expectations are that it may cross above $1,500 by the year-end. Indian spot gold prices are around 34,500 rupees/10 grams.

On the other hand, silver prices are around $15/troy ounce internationally and 38,000 rupees/kilogram in India.

The relatively slower investment demand for silver internationally has rubbed off on Indian investors as well, where demand has also been affected by an import duty hike to 12.5% from 10% as well as lack of liquidity and slack seasonal demand.”Demand is quite poor currently,’ says Ganesh Aggarwal, a bullion dealer. 

However, Indian investment demand — like in most of Asia — tends to pick up when prices are on the upswing. With international investment demand expected to pick up in coming days, its likely that Indian demand would firm up in the next 2-3 months, given also stronger seasonal offtake during festivals.

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