Silver price jumps 8% in two weeks on industrial demand; gold follows suit

Gold-silver ratio indicates more upsurge possible for the white metal

The price of silver jumped 8 per cent in both domestic and international markets on the back of a sharp rise in industrial demand ahead of the Chinese New Year celebrations on January 25, 2020.

Silver traded at $17.9/oz at the London spot market on Thursday, recording an 8.2 per cent jump from its recent low about two weeks ago.

After hitting its recent high of Rs 49,950/kg in the popular Zaveri Bazaar here on September 4, silver in spot sales plunged to trade at Rs 43,225/kg on December 9, before bouncing back to Rs 46,580/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 usually build their inventory before going for two-three weeks of New Year leave. They aim to restart factories with a full raw material quota. Hence, the upsurge in demand for industrial commodities has pushed silver prices up. Also, indications of easing trade tensions between the US 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.

Gold also followed suit, albeit slowly. China and the US agreed to ease trade tensions, thus reducing risk appetite for the yellow metal against inflation hedge.

At Zaveri Bazaar, the gold price jumped 2.7 per cent in the last two weeks to trade at ~38,635/10g on Thursday, from its recent low of Rs 37,615/10g. Gold had hit a record price of Rs 39,031/10g on September 4.

Spot gold advanced as much as 0.4 per cent to $1,505.62/ ounce, the highest intraday price since November 5, and was at $1,504.08 at 1046 GMT (4:16 pm) in London.

After hitting a low of $57.77/barrel on October 2, the crude oil price also recovered trade at $67.09/barrel on Thursday, almost near its recent peak of $68.38/barrel on September 15.

The rise in demand for silver is coming from the automotive sector for battery production. 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 the level of 94 in July, the weakest since 1991; the comfortable level is around 66.

“Going forward, there is more upside in silver than gold,” said Gnanasekar Thiagarajan, director, Commtrendz, a city-based commodity broking firm.

Meanwhile, the US economic data continues to pose a risk as new orders for key US-make capital goods barely rose in November and shipments fell. 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..