If you are a commodity investor looking to bet on precious metals, you must be wondering which one of the two top-of-the-mind metals – gold and silver – would be a better investment bet for 2017.
While both metals are impacted by several common factors, commodity experts believe silver could trump gold in the coming months.
“I think silver is better placed due to drop in production and pick-up in demand of solar panels and electronics sector. Demand from solar panels is soaring from emerging markets and hence silver looks very attractive to us.” Kunal Shah, Head of Commodity Research, Nirmal Bang Commodities, told Moneycontrol.
Hareesh V, Research Head, Geofin Comtrade also favours silver. “Price performance of gold and silver usually move in tandem. However, compared to gold, silver has traded at extremely low range since it tested its peak in 2011. Hence, there are chances that silver can perform better in a medium- to long-term basis,” he said.
Silver had hit a high of USD 49.51 an ounce in 2011 in the global market. Spot silver has shed almost 72 percent by January 2016 from those peaks. Silver started the year at USD 13.79 an ounce but gained steadily testing a high of USD 21.10 by July, 2016.
However, it witnessed a selloff since taking prices to a low of USD 16.14 an ounce by mid-November. Currently prices are ruling around USD 16.72 an ounce, registering year-to-date gains of around 20 percent.
In domestic market, MCX silver futures started the year at Rs 33,335 per kg and moved up sharply to Rs 48,611, a gain of over 45 per cent, before retracing to current levels of Rs 38,949, registering a yearly gain of 16 percent.
On the other hand, MCX gold futures began the year at Rs 24,931 per 10 grams and is now faring at around Rs 27,000 levels, which is a gain of around 9 percent. It had touched a year’s high of Rs 32,455 in July.
At the London spot market, gold was at USD 1,060 an ounce on January 1, 2016, going up to a peak of USD 1,374 in July and sliding to around USD 1,134 an ounce by mid-December.
What would move the metals in 2017?
Several major domestic and global events defined the movement of the two previous metals during 2016.
Saurabh Gadgil, Director, India Bullion and Jewellers’ Association (IBJA) and CMD, PNG Jewellers, says demonetisation has played a big role towards the end of the year.
“The industry has gone through a lot of ups and downs this year, beginning with excise imposed early this year. The 41-day industry strike affected gold consumption and revenue loss for the industry. Additional restrictions including PAN card norm for purchases above Rs 2 lakhs brought in mixed reactions across,” Gadgil said.
“Pre-Diwali offers, promotions and wedding dates helped boost sales. However, demonetisation and other factors including reiteration of limits on gold buying affected the industry again,” he added.
Gadgil says investors should keep track of the impact of demonetisation, GST implementation and other government policies regarding purchase and holding the precious metals in 2017.
A slew of global factors, too, had their impact on the metals. “Silver is used heavily in industry. The factors that affected silver demand in 2016 was US dollar, silver supply and improved world economy. One of the reasons silver outperformed gold this year was because of rally in commodity prices which has led to increase in demand for silver by manufacturing industries,” Aasif Hirani, Diector, Tradebulls told Moneycontrol.
Hirani feels in 2017, both gold and silver in 2017 prices will be impacted by movement of USD and interest rate moves by US Fed.
Invest with a longer horizon
Commodity experts feel once should have at least a medium-term horizon for investing. “Silver has outperformed gold in 2016 and we expect demand of silver to rise in 2017 for industrial purposes. Also, there will be a lot of uncertainty in 2017, which should be good for gold and silver. However, like gold, we don’t see silver rallying too much in 2017, so anyone with a 3-years should start investing in silver,” says Hirani.
Geofin Comtrade’s Hareesh says demand factors will support silver. “Gold’s prices are likely to be lackluster in 2017. A strong dollar after the recent US rate hike and chances of further increase will weigh down prices. Concerns over demand from top consumers like India and China likely to add negative sentiments on prices. However, expectations over global growth forecast would support silver due to its appeal as an industrial metal,” he said.
Hareesh feels gold may trade within USD 980-1400 range an ounce in 2017 with mild negative bias, while MCX gold would trade in Rs 22000-30000 range.
Silver, on the other hand, is likely to be steady with stiff downside support at USD 12 an ounce and USD 28 on the higher side is likely as a strong resistance. MCX prices of silver may vary inside Rs 32000-62000 per kg levels.
Source :- http://www.moneycontrol.com