Silver Prices To Fall Further? IBJA Sees More Downside Risks, Points To Supply Glut In Global Markets
On Diwali, silver prices had already taken a steep hit by falling over 6%, trading at Rs 1,59,615 per kg.
Silver prices are likely to fall further after crashing last week, triggered by a supply glut in global markets, according to Kumar Jain, national spokesperson for the India Bullion and Jewellers Association (IBJA). Jain said most Indian marketers were sourcing their silver from the London Bullion Market Association (LBMA), which monitors international prices and supplies the metal globally.
On Diwali, silver prices had already taken a steep hit by falling over 6%, trading at Rs 1,59,615 per kg.
While silver demand surged in India as more buyers preferred it over gold during the festive season, international supply had already started tightening. To cool off prices, the LBMA released additional quantities into the market, leading to a sudden price drop worldwide. "Silver sales have cooled off now. We don't see much demand after Dhanteras, and prices are expected to fall further," Jain said.
India saw gold and silver sales worth Rs 36,000 crore during Dhanteras, but the festival rush quickly faded. Meanwhile, the global silver market is grappling with deeper structural issues. For five years, demand has exceeded supply from mines and recycled sources, driven largely by the solar industry's growing need for silver in photovoltaic cells.
Since 2021, demand has outpaced supply by 678 million ounces, according to the Silver Institute, even as total inventories in London fell from about 1.1 billion ounces at the start of 2021.
The strain worsened this year after fears that US tariffs under President Donald Trump could impact silver trade, prompting traders to rush shipments of over 200 million ounces into New York warehouses. Investment demand has also ballooned, with more than 100 million ounces flowing into global ETFs by September, pushing gold past the $4,000 per ounce mark for the first time in history.
The dual impact of trade hoarding and ETF inflows has drained London's reserves, leaving very little metal to support the roughly 250 million ounces traded daily. By early October, Metals Focus estimates the freely available "float" of silver not held by ETFs had plunged to below 150 million ounces, setting the stage for further volatility in global silver prices.
At the time of publishing this article, the silver rate in US spot market stood at $51.79 an ounce, down 0.22% as against the previous day's close. On India's Multi Commodity Exchange, silver futures for December delivery were trading 1.3% lower at Rs 1,54,671 per kilogram.
