Silver shines at ₹1 Lakh mark!

What’s the Point?

• Last week, Silver crossed ₹1 Lakh / kg, crossing this mark for the first time in recorded history.
• This is likely a catch-up in price with its precious metal peer, Gold, which has seen significant rise in the recent past. The Gold/Silver Ratio* had ranged around 100 in May’25. At 91.53 as on 9th June 2025, it is still 13% above its 10Y average.
• Silver has a 52% demand from industrial applications, and one of the biggest demand growth driver is its use in clean energy applications such as Solar energy and Electric Vehicles. The Silver Institute forecasts demand to exceed supply for each of the next 5 years.
• Silver is a voluminous metal to invest in physically – ETFs and Fund-of-funds approach offers a convenient and easy way to take exposure to silver as an asset class as they are backed by Physical Silver of high purity.

*Gold-silver is the ratio of gold price to silver price. In other words, it indicates how many grams of silver you can buy for one gram of gold. Higher ratio indicates silver is cheaper.

Numbers in Perspective

Source: Bloomberg, Silver Institute, BofA Global Research. Figures for demand in tonnes are averaged over 10 years from 2015-2024.

Catch-up underway – a discussion on the Gold-Silver Ratio

In May 2025, the Gold-Silver ratio ranged around and crossed 100, showing significant undervaluation relative to Gold. This ratio had crossed 100 only once in this century, during the pandemic when silver corrected sharply amid disrupted industrial activity. Elevated levels in this ratio have the potential to trigger mean-reversion trades, and the recent strength in silver prices can be partly explained by investors positioning for the ratio to normalize after silver’s prolonged underperformance. As mentioned earlier, as on 9 June 2025, the ratio stood at 91.53, indicating its higher than the 10-year average of 81.

Silver demand drivers for the last year

As per estimates in the World Silver Survey 2025, silver industrial demand rose 4% in 2024 to 681 million ounces (Moz), reaching a new record high for the fourth consecutive year. Clean energy requirements such as investment in grid infrastructure, vehicle electrification, and solar applications were key drivers for growth. AI is another driver for silver demand, as consumer electronics shipments increased. Duty cuts in India were reported to have increased jewellery related demand. On the other hand, reduction in investment and silverware demand in 2024 led to a reduction in total demand for Silver in 2024. On balance, Silver demand exceeded silver supply by 149 Moz in 2024 (13% of demand).

Tariff uncertainty and green policy tilt are key drivers for outlook

For 2025, the Silver Institute estimates some reduction in overall demand while the longer term estimates by analysts shows that demand growth for industrial applications is expected to grow at ~4% CAGR, with applications such as Solar seeing demand growth of 8%. Jewellery, silverware and investment demand, which are difficult to estimate, could see varying levels of demand.

In that context, global policies around clean energy and outlook for global trade assumes relevance in estimating long term demand for silver. Solar and Electric Vehicle related demand has been a key driver for Silver, and most economies have taken a strong view towards continued growth in adoption of these technologies. Risks to global growth outlook from tariff related uncertainties translate to risks to silver demand.

Source: Bloomberg, Silver Institute, BofA Global Research. Figures for demand in tonnes.

Need to diversify – silver as a tactical and strategic addition

Silver has the advantage of having an intrinsic demand and utility in its industrial applications. Long term demand growth is intact, coming from drivers such as solar panels, electric vehicles which are considered as themes for the next decade. It is an interesting addition to a portfolio, as it behaves provides dual exposure of that of a precious metal as well as an industrial commodity that is exposed to global growth. This exposure provides both opportunity and risk, as the world is currently undergoing significant uncertainty around tariffs and growth. Being an internationally priced asset, Silver also offers some hedge against currency risks. Investors considering an investment in Silver may wish to consider buying Silver ETFs and Fund of Funds such as the HDFC Silver ETF or the HDFC Silver ETF Fund of Fund. These have the advantages of 1) Convenience and Safety (no need to physically store voluminous silver, the AMC does it for you), 2) Liquidity on the exchanges for ETFs and directly with the AMC for FOF, 3) Purity and 4) Lower Costs.

Sources: Silver Institute, BofA Global Research, RBI, Bloomberg and other publicly available information

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