Silver Price: Silver Shines Bright Amidst Dip: Experts Predict Up to 50% Return in a Year

Silver Prices Witness Significant Dip, Yet Promise Bright FutureThe global silver market has recently experienced a notable downturn, with prices retreating Importantly from their record highs, while internationally, silver has fallen by 10. 9% from its peak of $54. 45 per ounce on October 16, now trading around $48. 59, while domestically, the decline has been even sharper, with prices plummeting 18% from Rs 182,500 per kilogram on October 14 to Rs 149,500. This correction comes after a period of solid gains, driven primarily by a decrease in safe-haven demand, particularly since the Diwali period, and a wave of profit-booking by investors, while the easing of global trade tensions has reduced the appeal of precious metals as a secure investment, shifting investor interest towards riskier assets. However, market analysts believe this dip presents a lucrative opportunity for astute investors.

Anticipating a Strong 50% Return

Despite the recent weakness, market experts are optimistic about silver's prospects, projecting returns of up to 50% over the next year. Manav Modi, a Research Analyst at Motilal Oswal Financial, suggests that silver prices are likely to stabilize between $50 and $55 per ounce in the coming months, with a potential to reach $75 per ounce by the end of 2026, while if the US dollar maintains its position around the 90 mark, domestic prices could soar to as high as Rs 240,000 per kilogram. This forecast is particularly encouraging for investors looking beyond traditional equity markets for substantial gains. The underlying fundamentals, including growing industrial demand and constrained supply, are expected to support this upward trajectory, making the current dip an attractive entry point.

Factors Contributing to the Recent Price Correction

Several factors have contributed to silver's recent price decline. A primary reason is the reduction in demand for safe-haven assets. As global trade tensions ease and the overall economic outlook improves, investors tend to reduce their exposure to assets like gold and silver, which typically perform well during times of uncertainty. On top of that, the impressive rally witnessed in silver over the past year – delivering 44% in dollar terms and 55. 72% in rupee terms – prompted many traders to book profits. This profit-taking, coupled with a shift in investor sentiment towards riskier assets, created downward pressure on prices, leading to the current correction. The market's natural cyclical behavior also plays a role, with periods of rapid ascent often followed by consolidation or slight pullbacks.

Industrial Demand and Supply Deficit: The Long-Term Drivers

While short-term demand has softened, the long-term outlook. For silver remains exceptionally strong, primarily driven by a looming supply deficit and burgeoning industrial applications. Anil Ghelani, Head of Passive Investment & Products at DSP Mutual Fund, highlights that silver supply is inherently limited and has consistently declined in recent years. Projections indicate a significant deficit of 118 million ounces in 2025, a strong indicator for future price appreciation. Silver is a critical component in green energy technologies, including solar panels, and is vital for the rapidly expanding electric vehicle (EV) industry. As the world accelerates its transition to sustainable energy, the industrial consumption of silver is set to skyrocket. Stable mining output and limited recycling capabilities further tighten the market, reinforcing the bullish medium-term prospects for this white metal.

Prudent Investment Strategy for Silver

Viral Bhatt, founder of Money Mantra, advises investors to view the current dip as an opportunity but to proceed with caution. He recommends limiting silver investments to 3-7% of a total portfolio. While the potential for high returns is significant, investors should avoid large lump-sum purchases. And over-exposure, as silver has historically been a volatile asset prone to short-term fluctuations. Fund managers suggest a staggered approach, buying on dips to average out costs and mitigate risks. This balanced strategy allows investors to capitalize on silver's anticipated growth while safeguarding against its inherent volatility, ensuring a more stable and potentially rewarding investment journey in the long run.