Gold, Silver Rally Driven By FOMO, Supply Squeeze: Prices To Normalise Post-December, Says Ajay Kedia
The rally seen from August to the end of October was boosted by strong industrial and ETF demand, coupled with auspicious buying during festivals like Dhanteras.
The record run in gold and silver prices, which saw them hit new highs not seen since 1980 or 2011, was primarily driven by a mix of market sentiment, tight supply and auspicious buying, according to Ajay Kedia, director of Kedia Advisories.
Kedia notes that while the initial price correction was expected, the subsequent upward movement was due to geopolitical pressure and supply-side constraints. "The prices had corrected but moved up because of pressure and tension. There was a supply squeeze for silver due to demand from various sectors," he said in a conversation with NDTV Profit on Monday.
Kedia's Outlook On Gold, Silver Prices
Kedia emphasises that sentiment plays a powerful role, especially in the Indian context. The rally seen from August to the end of October was boosted by strong industrial and ETF demand, coupled with auspicious buying during festivals like Dhanteras.
"India is a price-sensitive population, but in the case of gold and silver, we have a sentimental demand. There will be FOMO to come up when prices shoot up," he added.
Looking ahead, Kedia believes the current demand surge will ease. "We don't expect the demand in October to continue but we will be normalisation," he expects. While the marriage season might provide a temporary boost, prices are expected to stabilise.
"After December, which is post the marriage season, there will be some demand before the new season starts."
Silver Supply Squeeze And ETF Premium
Kedia highlighted that the new scenario of sustained industrial and ETF demand, particularly from sectors like data centres and semiconductors, suggests this demand structure should continue to be monitored.
Silver prices had hit all-time highs during October, as a short squeeze in London added momentum to the rally. Silver ETFs trading up to 18% above their net asset value.
The strong investor appetite for silver is reflected in the record-breaking inflow data. Net inflows into Silver ETFs in September hit an all-time high of Rs 5,341.67 crore. This surge pushed the total assets under management of Silver ETFs to Rs 36,460.94 crore in September, significantly up from the Rs 26,292.34 crore recorded in August.
