Why Silver is Rising and One Stock to Watch

Precious metal prices are on a roll in global markets and silver is leading the way.

If you've been keeping up with the financial news, you would be aware of the sharp rise in the price of silver in the commodities market.

In India, silver prices have scaled new record highs above Rs 125,000 per kg.

This has grabbed media headlines and triggered discussions about the next direction of prices. Will the bull market continue or will prices fall?

In this article we will discuss the price of silver and its prospects going forward.

#1 Best of Both Worlds

Global markets are more concerned about geopolitics than ever before.

The Middle East, Ukraine, India-Pakistan, and potentially, Taiwan are well-known flashpoints. Recent developments have added Thailand-Cambodia and Venezuela to the list.

Military tensions tends to send the prices of precious metals soaring. This time has been no different.

Precious metals have a safe haven appeal to them, gold more than silver.

However, as long as wars do not escalate and global trade isn't affected, economic activity will hold up. This is important for the price of silver as it's an industrial metal as well as a safe haven asset.

Thus, silver is currently enjoying the best of both worlds - safe haven buying and industrial demand holding up. This scenario will be true as long as a major war doesn't disrupt global trade.

#2 Sticky Inflation in the US

The sticky nature of inflation in the US is also supporting prices of precious metals including silver.

Financial markets have come to accept the persistent nature of inflation. This has caused a rise in interest for investments like gold and silver.

The recently passed spending bill in the US will add fuel to the inflation fire as the Trump administration attempts to boost economic growth.

Precious metals have historically acted as a hedge against inflation and this is what we are seeing this time as well.

#3 Market Sentiment About Industrial Demand

There was widespread fear in global markets a few months ago that Trump's tariffs would send the world into a recession.

But these fears proved to be wrong. The US has signed trade deals with many countries and has not implemented punitive tariffs on those countries.

India has been an exception to this of course. But the 50% tariff on Indian exports is not going to derail India's growth beyond a point.

This has boosted confidence in commodity markets that a global recession can be avoided, which in turn will keep demand for commodities stable.

Silver being a very important industrial commodity has benefitted from this sentiment. Industrial demand for silver, especially in emerging sectors like electric vehicles (EVs) and 5G technology, is expected to increase, supporting a long-term bullish outlook on silver prices.

#4 The Risk on Trade

Financial markets swing between risk-on and risk-off in terms of sentiment. These terms indicate bullish and bearish sentiment respectively among investors.

Silver tends to outperform in a risk on environment. Financial markets have been in a risk on phase since mid-April, ever since it became clear that Trump wasn't going to impose wide-ranging tariffs on the world and instead would sign bilateral trade deals.

Either rightly or wrongly, the financial market believes economic conditions in 2025 are bullish for risky assets like stocks, cryptos, and silver.

Until this sentiment changes, the silver price could maintain its upward trend.

#5 Speculation

And then there is good old-fashioned speculation.

Most traders who are betting on silver aren't doing so because of any fundamental reasons. They're bullish on the white metal because they think its price will go up further.

In other words, silver prices are rising because traders think it will rise or should rise. Their speculative bets are driving the price of silver higher.

This is a highly risky activity best suited to professional traders. Retail traders/investors should ideally refrain from this activity.

What Happens Next?

Well, in the short term, the price of silver does look bullish.

However, investments in silver for the long term are best made either when the price is falling or in a slump. Long-term investors would do well to remember this.

Beyond the short term, the outlook is less clear. It's important to note that speculative run ups in price could end in a crash. This happens to the silver price regularly.

Gold is more stable when it comes to price volatility, but silver can move sharply in either direction. Keep this in mind if the recent run up in price has tempted you to trade in silver.

Having said this, the long-term fundamentals of silver are undoubtedly strong.

Hindustan Zinc: The Indian Silver Stock

Hindustan Zinc is India's largest integrated silver producer and ranks among the top five silver producers globally. It stands to benefit significantly from rising silver prices.

It's Sindesar Khurd mine in Rajasthan is one of the top silver-producing mines globally. In FY25, the company produced 687 tonnes of saleable silver.

In the fourth quarter of FY25, Hindustan Zinc achieved a 10% quarter-on-quarter increase in saleable silver production to 177 tonnes, driven by higher production.

Hindustan Zinc's silver operations are a key part of its diversified metal production portfolio, which also includes zinc. The company is supported by advanced mining and refining capabilities and a strong presence in both domestic and global silver markets.

The company is now expanding production, focusing on new businesses like critical minerals. It has announced plans to double the capacity of zinc, lead, and silver production.

The company has approved a project for setting up new 250 ktpa integrated smelter at Debari along with mines & mills expansion across the mines. The project is targeted to be completed in a period of 36 months with an overall cost of Rs 120 bn.

To know more, check Hindustan Zinc's fact sheet and latest quarterly results.

Conclusion

It makes sense for retail investors to hold some silver in a long-term portfolio but it doesn't make much sense to speculate on short-term price movements.

Also, while considering an investment in silver look beyond 2025. Just because the price of silver is going up right now, doesn't automatically make silver a great short-term investment.

The long-term fundamentals of silver are strong but it's a volatile asset.

Do your due diligence.

If you're interested in adding silver to your investment portfolio, this editorial will be helpful: How to Invest in Silver in India.

Also check out Equitymaster's YouTube playlist on silver.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...