Can silver be a safe haven for investors like gold? Experts believe silver can be a safe haven, although it is slightly more volatile than gold. This precious white metal is used for various purposes in India, from gifts and ornaments to investment tool. Gifting silver coins, jewellery, etc., during childbirth is considered auspicious. However, unlike gold, silver is extensively used in various industries, like solar panel producers, locomotive factories and power companies.

Silver is expected to be in high demand due to various positive developments. For instance, the PM Surya Ghar Muft Bijlee Yojana, which aims to provide free electricity via solar roof top installations, can accelerate the demand for silver in the solar panel industry. Besides, it is used in almost all electronic items. So, its potential is endless; however, macroeconomic and geopolitical factors, and demand and supply issues can impact its prices in the short term.
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What Can Affect Silver Prices?

Industrial Demand: Silver is used in various industries to make products like electronic devices, mobile phones, batteries, chips, computers, microwaves, cameras, photography gadgets, semiconductors, medicine, water purification, dentistry, glass coatings, nuclear reactors, and many more. So, any change in the supply and demand can lead to price volatility.

Vivek S.G., a certified financial planner and founder of Wealth Crafts, a Sebi-registered investment advisor, says, “Industrial demand for silver can significantly impact its price. Sectors like solar energy and electronics heavily rely on silver, and their growth could influence prices”.

Cost of Import: As silver is not naturally found in India, it is imported to meet the domestic demand. Hence, global factors have a substantial bearing on its price movement. Also, due to being traded in the US dollar, a policy change or a rate change in the US can impact its price. External factors can affect its price, even though there is no major policy change domestically.

Geopolitical Conditions: A price increase in silver could be due to a rise in demand or a fall in supply. The recent geopolitical tensions between Israel and Iran and between Russia and Ukraine have contributed to a major spike in silver prices. This shows that geo-political uncertainty can contribute to sudden volatility in silver prices as people start hoarding the metal as a safe haven.

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Is Investing In Silver A Wise Choice Now?

According to Vivek, “Investors often flock to silver during uncertain times. The demand for silver in sectors like solar energy and electric vehicles is on the rise. This could put upward pressure on prices in the long term.” He adds that the current scenario provides an opportunity for silver as a safe haven, but volatility remains a risk. However, as “there’s no one-size-fits-all”, you should consider your investment goal and risk appetite before investing in silver.

Experts suggest investing in these metals for diversification. So, if you anticipate a positive outlook for silver, you may invest a silver mutual fund or silver ETF, instead of coins, ornaments, or silverware that are considered for personal use.

However, Vivek cautions, “If you are looking for a long-term investment, silver’s potential for industrial demand growth could be attractive. However, for shorter timeframes, be prepared for high price swings. Also, silver can be a good addition to a diversified portfolio as a hedge against inflation and market volatility, but do not put all your eggs in one basket.”

As a standard rule, an investor should diversify the portfolio. One can have 10-15 per cent of the portfolio exposure in gold and silver to protect against inflation, market downturn, geopolitical tensions, etc. But do not forget that silver is more volatile than gold.