Forget gold, go for silver to add lustre to your portfolio

Synopsis

After the sharp run-up this year, with domestic prices touching the ₹1 lakh per kg mark, analysts believe investors could buy on dips over the next 1-3 months and allocate 3-5% of their portfolio to the white metal.

Mumbai: Aggressive investors looking to diversify their portfolios beyond equities and generate alpha could consider a small allocation to silver.

After the sharp run-up this year, with domestic prices touching the ₹1 lakh per kg mark, analysts believe investors could buy on dips over the next 1-3 months and allocate 3-5% of their portfolio to the white metal.

Since the start of calendar 2024, silver touched the ₹1 lakh per kg mark, a gain of 33.65%. In the last month alone, it gained 12.5%. It outperformed the Nifty 50 which returned 12.5% during the calendar year and lost 5.6% over the past month. In dollar terms, silver gained 47.25% and 13.56%, respectively, by similar comparison.

Agencies

"Silver is extensively utilised in electronics, solar panels, batteries, and increasingly in semiconductors, making it a critical component in modern technology. The growing industrial demand for silver along with the anticipation of another rate cut by the Federal Reserve is causing an increase in the metal's market value," said Vishnu Kant Upadhyay, AVP-Research and Advisory, at Master Capital Services.

"Rising industrial demand, high domestic imports, ETF buying by investors and Fed rate cuts have been supportive for silver," said Manav Modi, bullion analyst at Motilal Oswal Financial Services. After the sharp rally, Modi believes there could be some profit booking and advises investors to use major dips as a buying opportunity. He believes over the next 12 months silver could rise to ₹1.25 lakh per kg.

As technology advances and the demand for electronics and semiconductors increases, demand for silver will remain robust leading to an upward momentum in prices.

"Silver has seen a strong long-term bullish break; the trend could likely continue supported by lower rates for longer and the revival in Chinese industrial activity," said Bhavesh Jain, co-head of Hybrid and Solutions Funds at Edelweiss Asset Management. Jain believes it is more convenient for investors to buy silver using silver ETFs than the physical metal.

However, some fund managers believe the longer-term fortunes of silver will depend on how climate change and green tech initiatives are embraced and complied with by leading economies of the world. "If investors believe in Earth's rising temperature problem and its consequences, silver can serve as a proxy hedge," said Vikram Dhawan, head of commodities and fund manager at Nippon India Mutual Fund.

"Aggressive investors could buy on every fall and allocate 5-15% of their portfolio to the white metal," says Nirav Karkera, head of research at Fisdom.

Dhawan said in the near term silver prices are susceptible to a Republican win in the US as Donald Trump doesn't appear to be an environmentalist and is rather a fossil fuel enthusiast. Given the expected volatility and US elections nearby and uncertainty on further rate cuts by the Fed, wealth managers believe investors could stagger purchases.

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