Equity’s Back on Investors’ Radar as Silver Prices Plunge
Kolkata: Silver prices faced a significant drop on Thursday, countering the recent surge in equity markets, which have seen remarkable gains of 40% this year. Easing geopolitical tensions have prompted many investors to secure profits and shift their focus to more value-yielding asset classes that were previously affected by uncertainty.
– On Thursday, silver prices fell to ₹3.03 lakh per kg, following an all-time high of ₹3.20 lakh per kg.
– MCX silver corrected nearly 9% from these record peaks, while gold also experienced a decline, dropping to ₹1.51 lakh per 10 gm from ₹1.54 lakh the previous day.
The Impact of Geopolitical Changes on Silver Prices
Aamir Makda, commodity and currency analyst at Choice Broking, highlighted the dynamics at play: “Silver’s significant decline—nearly 8% from its record high—emphasizes its function as a rapid indicator of global risk.” He attributed this downturn to the recent de-escalation in geopolitical tensions, which included:
– The withdrawal of tariff threats against European allies.
– The introduction of a new NATO framework for the Arctic.
According to Makda, this shift has burst the geopolitical bubble that propelled silver prices to $95 per ounce, leading investors to take profits after recent highs driven by concerns over global trade volumes.
The Relationship Between Silver and the Equity Market
Makda elaborated, “While industrial demand for AI and green technology creates a long-term floor for silver prices, the immediate removal of the ‘trade war premium’ has sparked a massive wave of profit-taking. This allows investors to rotate back into a resurgent equity market.”
Consumer Behavior in a Volatile Precious Metals Market
According to the India Bullion & Jewellers Association (IBJA), the retail price for silver stood at ₹2.29 lakh per kg on January 1, climbing sharply to its historic peak on January 21. This volatility has led consumers to be cautious.
Industry insights from:
– Suvankar Sen, managing director at Secco Gold & Diamond: “Consumers are hesitant due to price fluctuations. Those hosting weddings are opting for lighter gold jewelry, while we’ve noted increased interest in silver coins in 5 gm and 10 gm denominations.” He believes that every dip represents a buying opportunity, as prices are likely to trend upwards this year.
– Varghese Alukkas, managing director of Jos Alukkas, observed, “Consumers have adopted a ‘wait and watch’ mentality as prices have recently dropped.”
– Navneet Damani, head of Research (Commodities) at Motilal Oswal Financial Services, noted the recent sharp outperformance of silver, indicating a more favorable risk-reward ratio for gold as the gold-silver ratio now approaches lower levels. He emphasized that maintaining a higher allocation in gold may help manage fluctuations while still being invested in precious metals.
Conclusion: Shifting Investor Sentiment Towards Equities
As geopolitical tensions ease, the equity market is reclaiming its prominence, making it an attractive option for investors pivoting away from volatile silver prices. While industrial demand ensures a long-term upside potential for silver, current market conditions favor a strategic focus on equities. Investors looking to navigate this landscape should be attentive to market shifts and consider adjusting their portfolios accordingly.