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Silver: A Dual-Role Metal

Silver started the year on a strong foot, gaining over 4% in the first week, rebounding from late-2024 challenges tied to higher yields post-U.S. elections. The market stabilized after a Federal Reserve rate cut, showcasing silver's resilience. Silver is not only a precious metal but also a crucial industrial resource. While its value is bolstered by its role as an inflation hedge, more than 50% of its demand is driven by the industrial sector, making it essential to analyze both its monetary and industrial influences.

Photovoltaic Industry: A Key Driver for Silver Demand

Despite signs of weakening industrial activity, particularly from China, the photovoltaic industry's rapid growth has kept silver demand prospects elevated.

Silver, crucial for solar cell production, is used as a conductive paste in solar panels, enabling electricity generation from sunlight. As solar energy adoption accelerates, silver's role in driving renewable energy transitions remains pivotal.

We anticipate a significant rise in its usage in the coming years, not only in solar applications but also across diverse sectors, including chemicals and beyond.

The Gold-Silver Ratio

Historically, silver has closely mirrored golds price performance, with the gold-to-silver ratio averaging approximately 70:1.

Currently, the gold-to-silver ratio is in the high 80s, indicating that silver is undervalued relative to gold, which could set the stage for future price growth. For silver to regain historical parity with gold, it would need to close the price gap, likely boosting its value.

The depletion of inventories, coupled with rising industrial demand, supports the case for silver price appreciation and may lead to a shift in the ratio, reflecting silver's increasing scarcity and demand.

Outlook

Given the current geopolitical developments, including the potential return of Donald Trump to the White House and the prospect of U.S. tariffs targeting key imports, political unrest is expected to drive the demand for bullion metals.

Additionally, recent reports of US tariff plans, has contributed to a sharp decline in the dollar boosting the appeal of the dollar denominated commodities.

Moreover, expectations of stimulus measures from China to revive its economy, along with a potential resurgence in industrial activity, should support the outlook for silver. We anticipate silver to maintain its positive momentum in the month ahead.

Technical View

The silver futures (MCX) chart shows a symmetrical triangle pattern with converging trendlines of lower highs and higher lows. This suggests a period of consolidation with lower volatility, implying a possible breakout in any direction. The price is currently lingering around the 20-day moving average, which could serve as immediate resistance at INR 91,520. A successful closing above this level may pave the way to the upper trendline resistance above INR 96,362. On the downside, the rising trendline around INR 87,044 acts as a significant support, coinciding with the 200-day MA.

The RSI indicator is neutral at 52, indicating a lack of significant momentum in either direction but the possibility of a shift based on the breakout. If the price breaks through the resistance levels with high volume, it could begin a bullish move towards INR 96,000 levels. A breakdown below the lower support line around INR 86,341 may result in a bearish move towards INR 82,000.

Based on above analysis, we are anticipating a further advance in Silver price in upcoming sessions and traders may look for long opportunity on dips till 89500 for the Target levels of 96360 – 98780 with SL at 87000.

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