Silver Prices: What's Next?

Silver prices have been going up and down a lot. They rarely keep going up without stopping. History shows that when silver prices make big moves, they are followed by periods of calm that can last from months to years.

What is Happening with Silver Prices?

Silver prices have been steady after a big drop. This is making investors worry that silver might not go up in value for a while. Silver is known for having long periods where its price doesn't change much. It doesn't usually keep going up without stopping. History shows that when silver makes a big move, it is followed by a calm period that can last from months to years.

How Long Do These Calm Periods Last?

After silver prices peaked in 1980, they went down and stayed low for almost 20 years. Then, they started going up again. In a more recent cycle, silver reached about $49 in April 2011 and then went into a deep correction. It fell nearly 70% over the next four years and stayed between $14 and $20 from 2015 to 2019. Even after the COVID-led rally to nearly $30 in 2020, silver spent close to three years in a broad $18-$26 range before trying to break out.

Why Does Silver Have High Returns and High Volatility?

Silver's current slowdown came after it rose 200% in two years, far outpacing gold's return. Gold prices also corrected, but the change was one-fourth that of silver's. This shows that silver is more volatile than gold. Silver reacts to both investment demand and industrial demand, which makes it more volatile. When prices go up quickly, traders sell to make a profit, and physical demand slows down a bit - that's when silver's price moves sideways.

Is Silver Entering a Boring Phase?

The last crash in silver prices is seen by analysts as a pause. A 40% correction from peak levels means that excess excitement has been removed. Silver feels like it's catching its breath after moving up strongly. Prices had gone up more than 150% to mark the high of ₹420,000, and after such moves, markets usually take time to digest gains.

What's Next for Silver Prices?

Higher prices are limiting buyers, even though industrial demand remains strong. Fundamental triggers from last year, such as inventory drawdown from major exchanges, are still a concern. Silver prices have been capped, which doesn't necessarily mean a big fall is coming, but it does suggest that returns may not be as sharp as before in the near term. Silver tends to swing between excitement and boredom. We may be entering the “boring” phase for a while before the next trend emerges.

Looking to the Future

A decisive breakout from the current range would need either a sustained dollar decline or clear evidence of supply tightness in physical markets. After a sharp rally, some time-wise correction is seen in silver, but then, much-needed triggers are available, and prices could again start to inch higher. Investors should consider taking exposure to precious metals via ETF or derivatives based on their risk profile and investment tenure. They should have at least 10% of their portfolio in precious metals, with a higher allocation to gold.