Post-Brexit silver on a high; does it remain a good investment option?

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Updated: July 7, 2016 1:02:40 PM

Silver prices have been on a relentless move upwards ever since United Kingdom voted in favour of exiting the European Union and has moved to over $21 an ounce in global markets, from the $15-16 levels a couple of months ago, giving solid returns to investors. (Photo: Reuters)

Silver prices on a high after BrexitSilver prices have been on a relentless move upwards ever since United Kingdom voted in favour of exiting the European Union and has moved to over an ounce in global markets, from the -16 levels a couple of months ago, giving solid returns to investors. (Photo: Reuters)

Post-Brexit, as investors shifted to safe haven investment amid global market uncertainties, a beneficiary has been silver. The precious metal has been on a relentless move upwards ever since United Kingdom voted in favour of exiting the European Union and has moved to over $21 an ounce in global markets, from the $15-16 levels a couple of months ago, giving solid returns to investors.

In the domestic market, silver touched an over two year high of Rs 47,700 per kg in the bullion market last week before retracing a bit early this week.

So, where is silver headed and is it a good investment at these levels? Commodity experts believe that the metal still has some steam left in it and could test higher levels in coming days.

“Silver prices are heading towards $22-$23/ounce in global markets and on Indian bourses it’s likely to touch Rs 52000/kg,” Kunal Shah, head of commodity research, Nirmal Bang Commodities, told FeMoney.

Prasad Kapre, CEO & Director, Style Quotient Jewellery Pvt Ltd is also bullish on silver. “Silver is definitely a great investment. Silver reserves are depleting worldwide at an alarming rate, hence the prices are bound to go up. Industrial demand too is on the rise,” Kapre said.

Gnanasekar Thiagarajan, Director, Commtrendz Research, has a higher target for silver. “I think silver can touch $25/ounce as demand is on the rise,” says Thiagarajan.

Shah advises buying silver on dips. “Silver has has run up sharply. But it still looks attractive to me. Besides strong investment demand, there is strong Chinese demand too. Both combined will fuel the fire. I would recommend buying on dips,” Says Shah.

He said that drop in supply and increasing demand are pushing up price of silver. “Silver looks an interesting proposition as global mine supply 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. On the other hand, silver’s industrial demand, is likely to increase its share of total demand in 2016,” Shah explained.

He pointed out in 2015 industrial fabrication demand accounted for an estimated 54 per cent of total physical silver demand. “Silver’s use in photovoltaics for solar energy is expected to move up 2016 and may move up above 75.8 moz (million ounces) in 2011, as global solar panel installations are growing at rampant pace. Silver’s use in this application may account for more than 13 per cent of total silver industrial demand in 2016, up from 1.4 per cent a decade ago,” Shah said.

Thiagarajan too feels increased use in photovoltaic cells and solar panels will keep the demand for silver strong. “There are talks of possible monetary easing in UK, China and EU to prop up economy. This will boost demand for base metals by industries. Silver is also an industrial metal with wide use in photovoltaic cells and solar panels,” Thiagarajan said.

He said another factor that is pushing silver prices up is the continuous rise in gold prices post-Brexit. “With uncertainty post-Brexit investors moved to gold as safe haven which pushed up its prices and some point it appeared costly. That is when money moved into silver causing its price to rise too,” Thiagarajan said.

He pointed out the fall in silver prices have been sharp during recent years. “From a high of $70 a couple of years ago, silver slipped to touched $15 recently. It is still under-priced,” he said.

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