MCX Silver Diwali Target 2023: The gold-silver ratio has fallen below the 80 level, suggesting that the silver will outperform gold prices going ahead, and will hit the level of ₹85,000 per kg by December 2023, analysts said.
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The gold-silver ratio (सोने-चांदी का अनुपात) was around 85 in the beginning of August, now has come down to around 79.1.
The gold-silver ratio is a metric used to understand the relationship between the values of gold and silver. This ratio shows the number of silver ounces required to match the value of one ounce of gold.
For instance, when gold is priced at $1,000 per ounce and silver at $20 per ounce, the ratio stands at 50:1. This determines the quantity of silver required to procure one ounce of gold.
With the gold-silver ratio hovering around 79.1, analysts expect gold prices to underperform silver.
“Historically, the gold silver ratio has not sustained above 82-82 levels and is now coming back to its normal average range. The ratio has fallen to 79.1 level now. This suggests that silver prices will outperform gold going forward,” said Ajay Kedia, Director, Kedia Advisory.
Gold prices have risen by just around 5% since March 2023 lows, while silver prices have jumped around 20% since their March lows.
“Contributing factors to this bullish trend in silver prices include rising industrial demand, abating geopolitical tensions and economic stimulus measures in China, the largest consumer of metals in the world,” Neal Bhai.
Along with the demand for jewellery, silver is also used in making solar panels, silver oxide, batteries, 5G technologies and electrical equipment.
Stimulus measures in China are expected to further boost industrial demand for the white metal. According to reports, the People’s Bank was also considering reducing reserve requirements, which may propel liquidity in the world’s largest metal consumer.
Meanwhile, analysts expect the US Federal Reserve to hold interest rates in September. However, elevated interest rates can weigh on bullion prices.
Given the positive outlook for precious metals, Kedia expects silver prices to rise towards ₹85,000 per kg levels on MCX by December 2023.
“Industrial demand, ETF buying and falling gold-silver ratio would likely lift silver prices to ₹85,000 level by December this year. Gold prices are expected to rise to ₹62,000 per 10 grams by the year end,” Kedia said.
