Mumbai's Gold and Silver Market Sees Correction

Strategic Insights -

Amidst the festive season in India, the market for gold and silver has witnessed a decline in prices, leaving some investors with losses. Despite the drop, experts remain optimistic about the long-term prospects of these safe-haven assets, pointing to institutional investors and central banks driving demand. The correction is seen as an opportunity for investors to add to their portfolios in a staggered manner, with experts suggesting a systematic investment plan for the medium- to long-term.

Key Takeaways:

  • Since hitting its October 14 high, domestic spot 999 silver has fallen 15% to Rs.152,501 per kg on October 22, according to the India Bullion and Jewellers Association (IBJA).
  • Silver exchange-traded funds (ETFs) have suffered more, with the two biggest silver ETFs by assets, Nippon Silver Bees and ICICI Prudential Silver ETF, falling 17% and 16%, respectively, since October 14.
  • Gold has gained 62% and silver has surged 77% year to date amid global uncertainty, tariff wars, and diversification away from the dollar.
  • The share of gold in India's own forex reserves has risen to 13.1% as of June from 9.6% a year earlier.
  • International gold prices have dropped 7.9% from their all-time high of $4,356 per ounce on October 20 to $4,025 per ounce after US President Donald Trump's statement signaling a 'fair' trade deal with China.
  • Investors who got into silver ETFs at the time of high festive and industrial demand have seen higher losses than those who might have bought the physical metal.
  • The discount between silver futures and spot prices has narrowed to around 3% as of October 22 from 10% on October 10.
  • Experts suggest that investors take a long-term view, considering silver as part of a diversified portfolio preferably through staggered allocations.

Statistics:

  • Domestic spot 999 silver has fallen 15% to Rs.152,501 per kg on October 22.
  • Nippon Silver Bees and ICICI Prudential Silver ETF have suffered losses of 17% and 16%, respectively, since October 14.
  • Gold has gained 62% year to date.
  • Silver has surged 77% year to date.
  • Gold accounts for 13.1% of India's forex reserves as of June (up from 9.6% a year earlier).
  • International gold prices have dropped 7.9% from their all-time high.
  • The discount between silver futures and spot prices has narrowed to around 3% as of October 22 from 10% on October 10.

Sources:

  • Hindustan Times
  • India Bullion and Jewellers Association (IBJA)
  • Nippon Silver Bees
  • ICICI Prudential Silver ETF
  • Multi-Commodity Exchange
  • Anand Rathi Wealth
  • Nippon India Mutual Fund
  • Kotak Asset Management Co.
  • All India Gems and Jewellery Council