Diwali demand ignites silver rally to Rs 91.50 lakh, experts urge caution amid frenzied buying

The festive season traditionally sees a rise in gold and silver buying, but this year, silver has stolen the spotlight. Jewelers and bullion dealers across major cities report strong pre-Diwali buying, driven by both traditional demand and speculative interest from retail investors. The sharp rally in the spot market has not only amplified silver’s visibility but also triggered a wave of short-term trading activity, as prices continue to climb beyond historical norms.

On the NSE, top-performing silver ETFs such as SBI Silver, HDFC Silver, and Axis Silver have surged between 9% and 13% as of October 9’s close, trading significantly above their underlying net asset values (NAVs).

According to market analysts, retail investors have played a decisive role in pushing up silver prices in recent weeks. Seasonal factors such as wedding demand, festive gifting, and industrial consumption — especially from the solar and electric vehicle (EV) sectors — have contributed to the surge. However, experts point out that the current price momentum is increasingly speculative, with limited fundamental support.

“Jumping into the rally at this point is a high-stakes gamble that investors may end up losing,” a senior bullion analyst noted. “The speed of this rise makes it unsustainable in the short term. Any global correction in commodity prices, a strengthening rupee, or easing industrial demand could trigger a swift pullback.”

Experts urge caution

Rajat Jaiswal, Pilot & Founder of Keydroid and WAB Café, believes that investors should tread carefully: “In times of high volatility and economic uncertainty, investors with moderate risk appetite should prioritize diversification and disciplined allocation over short-term gains. The surge in silver and gold prices reflects global macroeconomic pressures and industrial demand, but it’s crucial not to chase rallies purely driven by sentiment. A prudent investor should limit exposure to precious metals to about 10–15% of their portfolio, while focusing on long-term growth assets like equities or bonds.”

He adds that gold and silver should act as stabilizers in a long-term investment strategy — not speculative bets based on short-term price action.

Silver's current valuation

Market data suggests that silver’s current valuation is far above its typical range for this time of year. The rally has been fueled by a blend of festive buying, investor speculation, and momentum trading, pushing prices to levels rarely seen in domestic bullion markets.

While some analysts acknowledge potential for a brief continuation of the rally, most expect a price correction once festive demand tapers off. The consensus among financial advisors is clear — the risk-reward ratio is now skewed against new entrants.

Silver outshines gold

Interestingly, silver has outperformed gold in recent trading sessions, reversing the usual trend where gold dominates festive demand. The divergence, while encouraging for silver investors, highlights its volatile nature.

Experts warn that such rapid appreciation, without sustained industrial or macroeconomic backing, often leads to sharp corrections. As Jaiswal emphasizes, “It’s better to stay patient, rebalance periodically, and avoid emotional investing. Chasing short-term gains in a euphoric market rarely ends well.”

With silver prices at historic highs and festive fervor peaking, India’s bullion market is buzzing. Yet, the message from experts is consistent — proceed with caution. While the metal’s long-term fundamentals remain strong, entering the market at ₹91.50 lakh per kg could expose investors to steep risks once the post-Diwali dust settles.