Silver demand surges amid high gold prices and Nifty decline: here’s why investors are bullish

For the first time in India’s history, silver sales have outpaced gold during the festive Dhanteras season.

Soaring gold prices have dampened traditional buying enthusiasm, pushing consumers and investors alike to consider silver as a valuable alternative.

With growing industrial demand, especially from the electric vehicle (EV) sector, silver's strong performance has even outshined the Nifty 50 this year, sparking renewed interest in its potential as a long-term investment.

Shift to silver this Dhanteras

Due to high gold prices, demand for the yellow metal dropped by 15% this festive season, with sales slipping from 42 tonnes last year to about 35-36 tonnes, according to Surendra Mehta, National Secretary of the Indian Bullion & Jewellers Association (IBJA).

However, silver experienced a 30-35% rise in sales despite a 40% price increase compared to last Dhanteras.

“We are collating data for silver because this is the first time we are seeing such a huge demand,” Mehta told Times of India, highlighting the historic shift.

Analysts attribute India’s declining gold demand partly to prices consistently staying above ₹80,000 per 10 grams.

The World Gold Council (WGC) has projected that India’s gold demand could fall to a four-year low in 2024, with prices driven by global uncertainties and increased demand from central banks and the solar industry.

In contrast, silver continues to attract buyers looking for affordable alternatives and investors seeking a potential growth asset.

Industrial demand boosts silver investment

Silver’s rising appeal is also fueled by industrial demand, particularly within the booming EV sector.

The metal is increasingly viewed as a strategic investment with long-term potential beyond its traditional uses.

“People now recognize the real opportunity in investing in silver,” Mehta added, underscoring silver’s growing appeal as both a precious and industrial asset.

With domestic silver prices crossing ₹1 lakh per kg, analysts have begun recommending it as a valuable portfolio addition.

Saumil Gandhi, Senior Analyst at HDFC Securities, attributed recent gains in silver to macroeconomic factors, including declines in US Treasury yields and a weaker dollar, which have also buoyed gold.

Analysts recommend adding silver to portfolios

Silver’s performance has outpaced the Nifty 50 index this year, delivering a 33.65% year-to-date gain, with a 12.5% rise over the last month alone.

Analysts suggest adding silver on price dips, with a potential portfolio allocation of 3-5% in the coming months.

An analysis by Capitalmind Financial Services highlighted silver as an appealing alternative to gold, especially given its unique position as both a precious and industrial metal.

Anindya Banerjee, Senior VP and Head of Research in Currency, Commodity & Interest Rates at Kotak Securities, advocates for a slight overweight allocation in silver, recommending a 15% allocation to precious metals within a portfolio, with 60% in silver and 40% in gold.

“Silver offers exposure to both gold and industrial metals, making it a better investment option for those with a higher risk appetite,” Banerjee noted in an Economic Times report.

Ace investor and commodities expert Jim Rogers also recently advised investors to consider silver, given gold’s record highs.

This Dhanteras season marks a shift not only in consumer buying patterns but also in investment strategy, with silver emerging as a promising asset.

Driven by affordability and the potential for industrial growth, silver could prove to be a strong addition to diversified portfolios, appealing to both traditional and forward-looking investors.