Profit-booking may come in once the price is breached, say experts.
The price of silver in India is fast approaching Rs 1 lakh/kg – a price that the white metal has never seen before.
On Friday, the July futures on the MCX, the price closed at Rs 91,149/kg – over 20% jump from April. In the wholesale market in Mumbai, silver was trading at Rs 89-90,000/ kg on Saturday.
Even globally, silver prices have been on the boil. It increased 6.5% on Friday, closing at $31.49 per ounce – the highest since February 2013. In 2011, silver reached its all-time high level of $48.7 per ounce, although this was short-lived. Clearly, there are more legs to this rally.
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According to the data provided by Nirmal Bang Securities, the open interest data from CFTC in international silver futures is at its highest level since September 2022.
The net open positions on the international commodity exchange for silver has increased by 69% from 24,632 contracts in September 2022 to 41,621 contracts as of May 14, the latest available weekly data. Over the past two months, bullish positions have almost doubled, while short positions have decreased by a third, indicating short covering.
Nigam Arora, author of the Arora report and a US-based algorithm analyst, said that “silver is currently highly overbought and vulnerable to a pullback. However, from a technical standpoint, there has been a breakout today, which is likely to attract more technically-oriented buyers. In 2011, a similar situation occurred where technically-oriented buyers bought, but then, both gold and silver prices started to fall. History does not always repeat itself, but investors should be cautious now.”
Another notable aspect of the rally is the fall in the gold-silver ratio below 80, reaching 78.6 on Friday night. This is the lowest it has been since July 2023. The decline in the ratio indicates the relative strength of silver compared to gold, and a decreasing ratio is considered favorable for silver investors.
Ajay Kedia, director of Kedia Advisory, stated that “the momentum in the market is strong as indicated by the falling ratio, and domestic silver prices are expected to surpass Rs 1 lakh/kg, and within a year, they could even rise to Rs 1.25 lakh/kg.”
However, on the other side are traders and investors in India who are waiting for the psychological level of Rs 1 lakh/kg to sell the silver they are holding.
Chirag Sheth, principal consultant at Metal Focus, a global bullion research firm, mentioned that “Indian investors have purchased more than 17,500 tons of silver bars and coins in the last ten years, and they may look for profit-booking opportunities if price reaches Rs 1 lakh/kg. However, all that depends upon how market moves ahead and barring some profit taking, some may decide to hold on for a longer time as well.”