Silver outlook: After steep runup over the past year, buy on dips

Two fund houses, Zerodha and 360 ONE, have recently launched new fund offers of silver exchange-traded funds (ETFs). Emkay Wealth Management, in a recent research note, expressed optimism about silver’s prospects over the next 12–18 months. The metal has already delivered 12.3 per cent return year-to-date. 

Driven by industrial demand 

A recovery in China would be positive for silver. “If industrial activities in China recover after the recent economic stimulus, that would raise industrial demand for silver,” says Hareesh V, head of commodities, Geojit Financial Services. 

Silver’s safe-haven appeal has also gone up. “Significant increase in uncertainty amid geopolitical tensions and President Trump’s tariff threats is boosting the safe-haven appeal of silver,” says Manav Modi, analyst, commodity research, Motilal Oswal Financial Services. 

The rupee’s depreciation against the US dollar since Diwali 2024 has supported domestic prices. 

Advancements in green technologies have bolstered industrial demand. “According to the Silver Institute, annual growth in demand for silver used in photovoltaic panels has been around 20 per cent since the pandemic. Rising global electric vehicle sales are another key demand driver,” says Modi. 

Silver supply is projected to grow by 3 per cent in 2025, reaching 1.05 billion ounces. “However, demand is expected to outpace this increase, leading to a market deficit,” says Deveya Gaglani, senior research analyst-commodities, Axis Securities. This calendar year would be the fifth consecutive year of supply deficit. 

“Tariffs or sanctions against major silver-producing regions like Mexico, Peru, and China, could disrupt supply,” says Modi. 

The gold-silver ratio is around 91 compared to a historical average of 65. “The gold-silver ratio suggests that silver is undervalued and hence attractive,” says Gaglani. 

Economic slowdown risk 

Silver prices have already factored in two rate cuts in the US. More rate cuts could boost prices further. However, a scenario of a long pause or expectations of rate hikes would hurt silver. 

Silver’s strong industrial usage links it to economic cycles. “With around 60 per cent of mined silver used in industrial production, it is very sensitive to economic growth,” says Prashant Tandon, executive director, investment advisory, Waterfield Advisors. Hareesh adds that any decline in industrial activities, especially in China, would adversely affect silver. 

 

Should you buy now? 

Silver has underperformed gold by 6.6 percentage points over the past three months. “This indicates potential for catch-up gains,” says Tarun Birani, founder and chief executive officer, TBNG Capital Advisors. 

Experts recommend a cautious approach after silver’s rally in 2024 and 2025. “Buy on dips and in a staggered manner. Invest for medium to long term,” says Modi. 

Beware of volatility 

Silver’s dual nature as a precious metal and industrial commodity makes it more volatile than gold. “It reacts to both

economic cycles and industrial growth,” says Birani. 

“Its sharp price swings limit its appeal as a consistent hedge against market instability. Gold offers steadier returns and remains the preferred hedge, especially in uncertain times,” says Tandon. He adds that silver’s three-year rolling standard deviation is 30.3 per cent, compared to gold’s 17.7 per cent.   

“Adding 5–15 per cent commodities exposure to a diversified portfolio significantly improves its risk-adjusted return. Within the commodities allocation, not more than 25 per cent should go to silver,” says Tandon. 

Birani recommends a minimum investment horizon of five years. He recommends choosing a silver ETF that is backed by physical silver, and has a low tracking error, high liquidity, and a low expense ratio.