Gold Shines, Silver Struggles: Near-Term Outlook

Gold is positioned to outperform silver in the immediate future, primarily driven by current macroeconomic and geopolitical conditions that favor the yellow metal. Harshal Barot, a Senior Consultant at Metals Focus, suggests that silver might underperform gold over the next few quarters. This is partly due to weak demand in India, where fabricators and bullion dealers are still managing significant inventory from earlier high imports.

However, the outlook for silver brightens over a longer horizon. Barot predicts that once gold approaches its all-time highs, silver prices are likely to gain momentum. Over a two- to three-year period, silver could potentially outperform gold as its price starts to pick up. Despite import restrictions, the Indian silver market is not experiencing shortages.

Meanwhile, gold prices are demonstrating robust momentum, trading above $4,650 per ounce, with a potential target of $5,000 per ounce. Higher import duties and a weaker rupee are expected to push Indian gold prices to new peaks. The approaching festive and wedding seasons in India are anticipated to boost gold demand, although significant price increases could lead to order delays or cancellations.

Consumer behavior in India is adapting to higher gold prices. While demand for bridal jewelry remains resilient, with a preference for 22-carat gold, buyers are opting for lighter jewelry pieces. A more pronounced shift is observed in daily-wear jewelry, where consumers are increasingly choosing lighter weights, 18-carat and 14-carat gold, and diamond alternatives to manage costs.