Industrial demand is driving silver
Bagga pointed out that, unlike gold, most of the demand for silver is industrial, making price dynamics more sensitive to global growth and technological trends. “Solar panels are a big driver. Solar capacity has increased nearly tenfold in the past decade, and while silver use per panel has fallen, total solar silver demand has still increased by about three times,” he said.Other fast-growing applications include data centers, electronics and electric vehicles (EVs). “Data center capacity has increased from about 1 gigawatt to almost 50 gigawatts over the past 25 years. Demand for silver here is again about three times higher. EVs use 70-80% more silver than internal combustion vehicles, and as EVs gain market share, that alone could triple demand,” Bagga said.
The supply shortage is contributing to the upward trend
On the supply side, Bagga says silver faces inherent limitations because it is rarely mined independently. “Almost 80% of silver is produced as a byproduct of copper, zinc, lead or gold mining. You cannot simply increase the silver supply on your own,” he said. Global silver mining has remained stable even as demand has increased, leading to undersupply in the market over the past three years.
“When you add investment demand on top of this industrial demand, prices get an additional boost – and that’s exactly what we’re seeing now,” he said, adding that while the metal could consolidate after the sharp run-up, long-term fundamentals remain intact.
What should investors do now?
Bagga advised investors not to aggressively chase the rally but to maintain a prudent asset allocation. “We previously suggested an allocation of around 5% to gold and a small portion to silver. With the rise in prices and the availability of ETFs, the precious metals allocation in portfolios has naturally increased to above 10%,” he said. He warned against overexposure. “I would recommend no more than a 10% allocation to gold and silver combined. Historically, once these metals reach their peak levels, they underperform for years,” Bagga said. In India, however, factors such as the depreciation of the rupee and inflation provide additional cover, making gold and silver attractive stores of value in the long term.
Bagga also highlighted India’s traditional affinity with precious metals. “Indian households already own nearly 30,000 tonnes of gold. Silver ownership is even more difficult to quantify because of silver inherited from generation to generation. As a community, we are already overloaded with precious metals,” he said.
Trade policy, geopolitics and long-term prospects
On the impact of trade policy and geopolitics, Bagga noted that silver has been classified by the US as one of the crucial minerals, although no tariffs have been imposed so far. He also pointed to changing global savings patterns, including the shift of Chinese households from real estate to gold – and possibly silver – after huge losses in property valuations.
“For India, which is largely dependent on silver imports, the focus should be on securing supplies from friendly countries and boosting domestic production where possible, especially from zinc, lead and copper mining,” he said.
Bagga believes the appetite for silver will remain strong. “At these levels, new investors may not rush in, except through SIPs in ETFs. But existing holders are unlikely to sell. Over time, investors may rebalance towards equities, but silver and gold will be held for the long term,” he said.
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