Silver prices jumped by 8 per cent in both domestic as well as international markets on a sharp increase in industrial demand ahead of the Chinese New Year celebrations scheduled next year on January 25, 2020. Silver prices bounced back to trade at $17.9/oz in the London spot market, thereby recording an 8.2 per cent jump from their recent lows about two weeks ago.
After hitting its recent high of Rs 49,950 a kg in the popular Zaveri Bazaar here on September 4, silver in spot sales plunged to trade at Rs 43,225 a kg on December 9, before bouncing back to trade at Rs 46,580 a kg on Thursday. The price of silver in the domestic market followed its movement in the benchmark London spot trade where the white metal slipped to trade at $16.58/oz on December 6 from its recent peak of $19.6/oz on September 4.
“Chinese investors normally build their inventory before heading for two-three weeks of New Year leave. They aim to start factories on their returns with full raw materials quota. Hence, the upsurge in demand of industrial commodities has pushed silver prices up. Also indications of easing trade tensions between the United States and China has supported industrial commodities and silver is no exception,” said Ajay Kedia, Director, Kedia Stock & Commodities Research, a city-based equity and commodities broking firm.
Meanwhile, gold also followed suit, albeit slowly on both China and United States agreeing to ease trade tensions for better economic growth, thus reducing risk appetite for the yellow metal against inflation hedge. After hitting a low of $57.77/barrel on October 2, crude oil prices also recovered lost ground to trade at $67.09/barrel on Thursday, almost near its recent peak of $68.38/bbl hit on September 15.
In the London spot market, gold prices jumped by 2.7 per cent in the last two weeks to trade at Rs 38,635/10g from their recent low of Rs 37,615/10g. Gold price had hit its record of Rs 39,031/10g on September 4 following the trend in the international market.
Silver’s industrial demand has jumped sharply from automotive sector for use in battery. Around two-thirds of global silver production is used for industrial consumption. Hence, its demand and price are determined by the consumption trend in the industrial sector.
The gold–silver ratio had hit a level of 94 in July, the weakest level since 1991 and the comfortable level of around 66. From July levels, therefore, either silver had to rise or gold had to decline.
“Going forward, there is more upside in silver than gold,” said Gnanasekar Thiagarajan, Director, Commtrendz, a city-based commodity broking firm.
In the international market, gold price provided additional positive trades to breach $1504/oz on Thursday, hinting that the price might recover in the short term.
Meanwhile, the US economic data continues to pose a risk with new orders for key US-make capital goods barely rising in November and shipments falling. This suggests business investment will probably remain a drag on economic growth in the December quarter. Analysts, meanwhile, fear that the tariff war with China would continue to weigh on the US economy in 2020.