Diwali sees silver with 20 year sales record, gold lacks luster

Indians bought 220 tonnes of silver during the Dhanteras-Diwali period, the highest in two decades, according to figures compiled by the India Bullion & Jewelers Association (IBJA). Silver sales increased by 37% compared to 160 tonnes in the same period last year.Silver coins of 5 and 10 gram weights accounted for 60% of the demand, while the rest consisted of utensils, diyas (lamps), idols and jewellery, according to the IBJA.

“Rs 2,200 billion worth of silver has been sold in the Dhanteras-Diwali period. This has never happened at least in the last 20 years. Silver still has enough legroom to see a further northward move. So consumers have invested in silver.” said Surendra Mehta, National Secretary of IBJA.

Rising gold prices and silver that breached an 11-year record to touch Rs 1 lakh per kg, prompted consumers to rush to buy silver during Dhanteras-Diwali, which was considered auspicious to buy these safe assets. The IBJA said 47 tonnes of gold were sold during the festive period, 15% less than last year, as prevailing higher prices deterred many potential buyers.

Since the start of 2024, silver has seen strong gains, rising nearly 34% to Rs 1 lakh per acre. kg during Dhanteras-Diwali. On Tuesday, silver traded at Rs 96,765 per kg in the physical market.

“There is volatility in the precious metals market over the last two days due to the US presidential election followed by the Federal Reserve rate cut meeting. This is normal during any such major global event. But silver is on a bull run because it has been underpriced for a very long time. We expect silver to touch Rs 1.5 lakh per kg next Diwali,” said Prithviraj Kothari, managing director of RiddhiSiddhi Bullion. Silver is used in many modern technologies, including electronics, solar panels, batteries, and semiconductors.

Rising demand for electric vehicles (EVs), which require 15-30 grams of silver each, is a major driver. The transition to renewable energy and the rise of artificial intelligence are also expected to drive silver demand.

Investors are seeking safe-haven assets like silver amid geopolitical tensions such as the Russia-Ukraine war, the Israel-Hamas war and tensions between the United States and other countries, Kothari said.

The global silver deficit is expected to increase 17% to 215.3 million troy ounces in 2024 due to a 2% increase in global demand led by robust industrial consumption and a 1% decline in overall supply, according to the Industry Association- Silver Institute.

“Indian investors typically see silver as an opportunity – it’s a diversification, helps better asset allocation. It’s quite liquid,” says Nilanjan De, director of Wishlist Capital, an asset management firm.

“Silver prices are expected to witness further traction. While short-term volatility is widely expected, the long-term outlook is quite robust.”