According to experts, a fall of more than Rs 1 lakh may be seen in the prices of silver.Image Credit source: ChatGPT
Even though the prices of silver are making record after record from the country’s futures market to Delhi bullion market, there may be a big fall in the prices of silver in the coming days. According to experts, at present the international target of silver prices is $100 and the target in the country’s futures market is Rs 3.25 lakh. If silver prices reach this level at both the places, then a big fall in silver prices may be seen.
According to experts, at present silver has become quite overvalued. The reason for this is tariff tension. Recently, Trump has imposed Greenland tariff on European countries. But in the coming days, the pressure on Trump to remove the tariff may increase. On the other hand, recovery in the dollar index can also act as a big factor and bring down the prices of silver.
Metals Replacement Theory, under which investors may be inclined towards other metals like copper and aluminum instead of silver. Due to which the prices will also reduce along with the demand. Gold silver ratio can also play a big factor. Which is currently at its lowest level in 14 years. This is also expected to rise. Profit booking by investors is also being seen as a big factor in bringing down the prices of silver.
The special thing is that in the last one month there has been an increase of 54 percent in the prices of silver. On December 17, the price of silver closed at Rs 2 lakh for the first time. Whereas on January 19, the price of silver reached the level of Rs 3 lakh for the first time. This means that an increase of more than one lakh rupees has been seen in the prices of silver in a month. Experts say that the price of silver may fall by 30 percent from the peak i.e. a fall of Rs 1 lakh or more. The biggest question is whether such expensive silver will remain the center of attraction among investors in the coming days or not. Let us try to understand it in detail…
understand the target first
According to experts, a target has been set for silver from the international market to the local futures market of the country. First, if we talk about the international market, the target of silver prices is $100 per ounce. Which is currently being seen at around $93 per ounce. This means that the price of silver needs $7 per ounce to reach $100 per ounce. On the other hand, the target of silver prices in the future market of the country has been kept at the level of 3.25 to 3.30. At present, the price of silver on MCX is seen below 3.20. In such a situation, to reach Rs 3.30, silver needs more than Rs 10 thousand. A fall may be seen in the prices of silver at this level.
What could be the reasons for the decline?
- Possible reduction in tariff: At present, the main reason for the rise in silver and gold prices is Trump’s tariffs. Due to which investors are having to turn towards safe haven. If experts are to be believed, we may see relief on tariffs in the coming days. Imposing tariffs on countries in Europe and the Middle East means America’s own loss. Recently Trump has announced the Greenland Tariff, which will come into effect from February 1. After that, the 10 percent tariff will increase to 25 percent from June. Experts estimate that this tariff may be withdrawn before February 1.
- Recovery in Dollar Index: On the other hand, a very good recovery has been seen in the dollar index. In the last one month, an increase of 1 percent has been seen in the dollar index. The dollar index was at the level of 99 on Monday, which has come down to the level of 98 on Tuesday morning. But experts believe that further increase in the dollar index may be seen in the coming days. Due to which the prices of silver may come downwards.
- Replacement Theory of Investors: Gold and silver prices are at record levels. Experts say that the price of silver has become so high that returns at this level may be quite limited. In such a situation, investors are now adopting the replacement theory and focusing on other metals. According to experts, copper can now be the next target of investors. Copper has given very good returns to investors in the last few months. Due to low value, copper may become hot cake in the current year.
- Gold Silver Ratio: At present the gold and silver ratio remains at the level of 50. Which is the lower level of 14 years. This means that the demand for silver remains quite high. Due to which continuous investment is also taking place. But there are chances of it rising from here. The reason for this is the prices of silver. Which has increased so much that the possibilities of return on investment from here are very less.
- Fed Rate Cut Discount: After the inflation and employment figures, there are chances that the Fed may cut the rate this time. The Fed meeting is to be held in the last week of January, which supports metals. On this, experts believe that the Fed rate cut has now been discounted. Now its effect will not be seen in the prices of gold and silver. More important than that will be the commentary of the Fed head, which will predict whether there will be a rate cut in the remaining months of the year or not. Fed Head Powell’s tenure is ending in May. In such a situation, after the January cut, there is no possibility of any rate cut till May.
fall of up to one lakh rupees
Due to all these reasons, a fall of 30 percent or more may be seen in the prices of silver. This means that even if the price of silver reaches Rs 3.30, a fall of up to Rs 1 lakh can be seen in the price of silver from there. This means that silver prices can be seen at the level of 2.30. Regarding this, Ajay Kedia, Director of Kedia Advisory, says that now the scope for returns in silver has become quite limited. You cannot earn much returns in future by investing more than Rs 3 lakh in silver. In such a situation, the demand for silver may reduce significantly in the coming days. He further said that now replacement of silver is being found in solar panels, EV and other electronics goods. Why would anyone use such expensive silver, when makers have other cheaper options. Use of expensive silver can also increase the prices of products. In such a situation, even the makers will not take such a big risk.
Could the situation be like 1980?
It is not that such a huge fall in silver prices has never been seen before. If we look at the historical data, in 1980, when the price of silver reached its peak at $50, within two months it saw a decline of up to 70 percent. Which was considered a big fall. Something similar was seen in 2011 also. When the price of silver was seen at $ 50 per ounce, a decline of 32 percent was seen in the prices of silver in the next 5 months. Kedia says that this time also something like this can happen. Whereas silver prices will be seen at the level of 3.25 or 3.30. After that a big fall may be seen in it.
What are the current prices?
An increase of more than 3 percent has been seen in the prices of silver on the Multi Commodity Exchange. During the trading session, silver prices rose by Rs 9,674 to Rs 3,19,949, which is a life time high so far. However, at 10.20 am, silver prices were trading at Rs 3,17,764 with an increase of Rs 7,489. A day ago the price of silver had closed at Rs 3,10,275. However, in the last one month, the price of silver has seen an increase of more than 50 percent i.e. more than Rs 1 lakh. In the month of January itself, an increase of Rs 84,248 has been seen in the price of silver.