Chennai: The current gold-silver ratio indicates a significant bull-run for silver. In the next 18 months silver prices in the domestic market can touch Rs 1.5 lakh per kg level.
The gold-silver ratio, which indicates how many ounces of silver it takes to buy one ounce of gold, usually stays between 40-1 and 60-1, but when it gets far above the high end of that historical average, it tends to return to the mean with a vengeance, said Ajay Kedia, MD, Kedia Commodities. It had touched high levels of 87-1 three months ago and currently stands at 79-1. The current gold-to-silver ratio still sits at a historically high level, currently dropping below 80. Historically, such elevated ratios have been a precursor to substantial silver price appreciation.
Silver could see a significant bull run, given the scenario still looks bullish for gold with the likelihood of a rate hike increasing. Silver historically outperforms gold in a gold bull market, with gold charting a gain of around 40 per cent during the pandemic and silver up a whopping 141 per cent.
Silver demand is expected to hit 1.2 billion ounces this year, the second-highest annual silver demand on record. This level of demand would create a structural market deficit of 176 million ounces, cutting further into global silver reserves. Demand will likely increase in the years ahead due to the solar energy market, with solar manufacturers likely requiring over 20 per cent of the current annual silver supply by 2027.
“We are witnessing a ‘once-in-a-decade opportunity’ for silver investors. My analysis suggests that Indian silver prices could reach Rs 150,000 per kg within the next 18 months as current scenarios favour this rally,” said Kedia.
The price of silver in MCX currently stands at Rs 93,047 per kg.
