There Are Many Reasons Why You Should Invest in Silver, Especially Now

The comments below are an edited and abridged synopsis of an article by Naveen Kumar

India’s people have an affinity for silver and gold. Silver has been a preferred choice: There is a good market, offering fair price discovery and reasonable liquidity. But the price of silver has been range-bound for quite some time, while gold has fared better on medium- to long-term basis.

India is the one of the biggest consumers of silver, and any changes in demand there have an influence on international prices. The exchange rate also plays an important role and works as a balancing factor between Indian and global prices.

The gold:silver ratio has been range bound and whenever it is skewed in favour of one commodity, after some time, it goes back to that range. After bottoming in 2010, it increased steadily. It retreated briefly in 2016 to close the year at 71.4 (although averaged 73.4 for the full year) but has resumed its uptrend since mid 2017. It closed out the year at 77, a high level.

When the ratio increases significantly, it indicates that the market is expecting major conflicts that could lead to greater instability. However, when the risk of conflict subsides, the ratio regresses to its historical average.

There was a rebound in international industrial demand for silver in 2017, which rose for the first time since 2013.

Future demand for silver is also rising in new forms such as bonding wire. Smart home demand in China, which requires bonding wire, has been steadily rising.

The new usages could create new demand pattern, which may also be influenced by prices of other metals.