Gold has given good returns this year. If you had bought the yellow metal at the start of the year you would be sitting on a profit of 17 per cent today. But did you think of investing in the other popular precious metal – silver?
Commodity market experts believe silver is likely to give much better returns in the long run than gold going forward. The feel demand-supply mismatch of silver and the correction that it has seen over the past years makes the metal a good investment option.
Kunal Shah, head of commodity research, Nirmal Bang Commodities is bullish on silver. “Silver is looking an interesting proposition and should perform well in 2016. Silver prices are likely to move up and the trend forward seems very bullish. By the end of 2016 silver prices on Indian bourses may test levels of Rs 42000/kg,” Shah told FeMoney.
Naveen Mathur, Associate Director, Commodities & Currencies Business, Equity Research & Advisory, Angel Broking feels silver prices on MCX can go higher towards Rs 41,000/kg (against current market price Rs 39,559 on April 20).
Mathur says between gold and silver, the latter could be a better bet. “Between gold and silver, the fall in silver prices has been drastic when compared to gold. Silver prices at current price of around Rs 39,559/kg in the Indian markets looks a very good level when compared to the highs of around Rs 70,000/kg in 2011. It would be a bargain hunt for investors at current levels from an investment point of view,” he felt.
Mathur points out that US Commodity Futures Trading Commission (CFTC) positioning for silver indicates buying interest has been created by hedge funds and money managers for most of the year 2016. As on April 5, 2016, money managers are net longs at 42,240 contracts when compared to 6918 contracts as on Jan 5, 2016, and hence rising silver prices.
According to Shah, global mine supply production of silver is projected to fall in 2016 by as much as 5 percent year-on-year. This would represent the first reduction to global silver mine production since 2002. There is a shortfall of around 6,50,000 tonnes globally. Simultaneously, silver’s industrial demand is likely to increase in the share of the metal’s total demand in 2016,” Shah said.
Shah pointed out in 2015, industrial fabrication demand accounted for an around 54 per cent of total physical silver demand. Moreover, silver’s use in photovoltaics for solar energy is expected to move up 2016 and may move up above 75.8 Moz (million ounces) as global solar panel installations are growing at a rampant pace. “Silver’s use in this application may account for more than 13 percent of total silver industrial demand in 2016, up from 1.4 percent a decade ago,” Shah said.