Silver prices experienced a significant drop of nearly 3 per cent on Tuesday, November 3, resulting in a loss of over Rs 5,000 per kilogram on the Multi Commodity Exchange (MCX). This decline has emerged just days before Dhanteras, a day when many households typically purchase gold and silver. At approximately 11.50 am, MCX silver futures were priced at Rs 1,78,624 per kg, reflecting a decrease of Rs 5,155, or 2.80 per cent.

According to experts, the recent downturn in silver prices is primarily attributed to macroeconomic factors and a broad market deleveraging. Elevated oil prices, robust US economic indicators, and ongoing inflation concerns have contributed to expectations that interest rates may remain elevated for an extended period. This situation has bolstered real yields and diminished the attractiveness of non-yielding assets, such as precious metals.

Additionally, silver has been adversely affected by weakness in technology stocks, given its substantial industrial applications in sectors like semiconductors and solar manufacturing. Experts noted that silver has underperformed relative to gold in recent weeks, with the gold-to-silver ratio rising above 79, the highest level observed in nearly a year, indicating a shift in investor preference towards gold amid market uncertainties.

Long-Term Outlook for Silver

The recent price correction does not necessarily signify the end of silver’s long-term rally, as per insights. Experts emphasised that the structural demand outlook remains robust, driven by global investments in renewable energy, electrification, and electric vehicles. Therefore, the current decline may be more indicative of a cyclical adjustment rather than a fundamental shift in demand.

However, investors are advised not to assume that silver has reached a stable bottom. Experts identified the $47-$50 per ounce range as a critical support zone in the international market. A sustained drop below $47 could lead to a more profound correction towards $43-$45 per ounce, especially if high energy prices continue to pressure inflation expectations and bond yields.

Conversely, a decrease in oil prices, easing bond yields, and renewed confidence in technology investments could facilitate a recovery in silver prices over the coming quarters. The market remains wary, and investors should remain vigilant regarding potential volatility.

Investment Considerations for Buyers

Experts believes that the recent price correction has made silver more appealing for long-term investors, although she cautioned against attempting to pinpoint the exact price bottom. Experts advocates for a staggered accumulation strategy, encouraging investors to gradually build their exposure rather than making a substantial investment at a single price point.

For those with a three-to-five-year investment horizon and confidence in sectors like renewable energy and infrastructure, periods of weakness may present opportunities to incrementally increase silver holdings. However, silver’s volatility compared to gold means that investors should be prepared for further price fluctuations in the near term.

The current market conditions reflect a nearly 20 per cent monthly correction in silver prices, alongside a gold-to-silver ratio exceeding 79, suggesting that considerable pessimism may already be factored into current valuations. Buyers may need to weigh their investment strategies carefully as they approach Dhanteras.

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