Silver corrects Rs 4,000 per kg in a week. Should you buy?

Silver prices have corrected more than Rs 4,000 per kg in the last one week. The white metal hit topped Rs 71,500-level on February 2 but was slipped to Rs 67,500 on Thursday, February 9.

However, in the longer run market experts remain positive on Silver on the back of strong recovery from China, push to solar energy, industrial demand, depreciation of rupee and easing interest rate scenario. They suggest investors long the white metal on dips.

Rahul Kalantri, VP – Commodities at Mehta Equities said that the new calendar year has started off on a mixed note for precious metals as Comex silver price did not show an enthusiasm similar to gold and remained largely the range-bound during the same period.

However, Kalantari remains positive on silver and expects a rally up to Rs 90,000 levels in the long run. He suggested investors should use this correction as a buying opportunity and accumulate the white metal. "Physical silver and silver ETF would be the preferred way to invest for long-term investors," he said.

Echoing the similar tone, NS Ramaswamy, Head of Commodities, Ventura Securities said that silver presently is well supported by the Rupee depreciation to the US dollar. It may correct to Rs 64,000-65,000 in the next three months but Investors can buy physical silver to see a target of Rs 77,000-80,000 in the next one year.

Silver witnessed a roller-coaster ride in 2022, thanks to increased volatility in the bullion market and industrial metals but managed to deliver around 15 per cent returns to investors. The metal faced bouts of profit taking but geopolitical tensions kept its demand intact.

Gold prices jumped 6.5 per cent in January 2023, but silver was down about a per cent during the same period. The divergent trend between gold and silver was apparent in the domestic markets also, said the market experts.

"Silver prices were under pressure due to sharp appreciation in the dollar as higher-than-expected jobs data dashed the hopes and expectations that the Fed and other central banks would sooner or later end the tightening cycle. Recession concerns also fuelled the Silver prices further," said Kalantari from Mehta Equities.

Silver, other than being a precious metal, has more usage in the industrial sectors and thus, industrial demand also guides its movement. Furthermore, gold also holds influence over silver prices.

On the other hand, Ramaswamy is neutral on silver in the short term. With the US 10-Year yield falling down and the US dollar losing its ground, silver has seen a recent correction, he said.

"The strong labor market in the US with lowest unemployment is a worry that the Federal Reserve may be forced to raise rates further due to the demand-pull inflation," Ramaswamy added.

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