Brief Summary
This video from The Hindu discusses the recent surge in gold and silver prices, examining the geoeconomic factors driving this trend and offering advice for investors. It covers the impact of global uncertainty, interest rate cuts, and industrial demand on precious metal prices. An expert provides insights on whether silver should be a part of an investment portfolio, considering risk appetite and potential returns.
- Gold and silver prices are hitting record highs due to geoeconomic uncertainty and demand.
- Industrial demand, particularly from the green economy and AI, is boosting silver prices.
- Investors should consider their risk appetite when allocating precious metals in their portfolio, with silver recommended for those with higher risk tolerance.
Introduction: Rising Gold and Silver Prices
Gold prices have surged to record highs, reaching 1,18,900 rupees per 10 grams, driven by high demand amid geoeconomic and geopolitical uncertainty. Similarly, silver prices have also skyrocketed, hitting an all-time high of 1,39,600 rupees per kg. The Indian rupee's decline against the US dollar has further fuelled the rally in precious metal prices. So far this year, gold prices have increased by 39,950 rupees per 10 grams, a 50.66% increase from the end of the previous year.
Factors Driving Precious Metal Prices
The expectation that the US Federal Reserve will continue to cut benchmark interest rates is contributing to the rise in precious metal prices. Lower interest rates reduce returns from financial instruments, prompting investors to seek alternative assets like gold and silver for better returns. An economic survey released earlier in the year had anticipated a decline in gold prices but an increase in silver prices, though gold has defied these expectations by also increasing.
Expert Insights on Silver Investment
Harshell Barat, a senior consultant at Metals Focus, explains that silver's price trend has largely mirrored that of gold, with greater volatility. The rise of the green economy, particularly photovoltaic cells and electric vehicles, along with power grid infrastructure development, has spurred industrial demand for silver. Applications linked to artificial intelligence have also boosted demand in consumer electronics. Silver's price volatility is due to its dual nature as both an industrial and a precious metal.
Silver as Part of an Investment Portfolio
While silver has shown an average annual return of 15.6% over a 20-year period, it has also resulted in losses in nine of those years, with the steepest loss being 20% in 2014. Barat suggests that precious metals are essential in a portfolio as a hedge against geopolitical and geoeconomic uncertainty. The allocation to silver should be based on an investor's risk appetite, with those having a higher risk appetite potentially allocating more to silver due to bullish forecasts. Some analysts now recommend that gold should constitute a higher portion of a portfolio, with figures such as 20% being suggested.
Did You Know? Silver Mining History
Formal mining of silver took place in 3000 BCE in Anatolia, modern-day Turkey. Gold preceded silver by at least 1,000 years, even preceding iron and copper. The quiz question asks which three countries accounted for more than 85% of global silver production between 1500 and 1800 AD. The answer to the previous episode's question about the first railroad in the US is the Granite Railway of Massachusetts, which opened in 1826.
