Sell gold, buy silver? Why poor man's gold is quietly becoming the real treasure

Economic Times

10 hours ago

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After making tons of money playing the safe haven trade, gold bugs are now shifting to silver in a dramatic bet that the white metal's time has finally come. Silver ETFs have surged around 21% in the last three months, crushing gold ETFs' modest 5% return as speculators abandon the stretched yellow metal for what could be the next mega trend in precious metals - poor man's gold.The silver surge hit fever pitch on Monday when MCX silver September futures smashed to a lifetime high of Rs 114,875 per kg. In international markets, spot silver rocketed 3.9% to $38.46 per ounce last week, hitting its highest level since September 2011. The rally was fueled by intensifying safe-haven demand after US President Donald Trump announced sweeping new tariffs, including a 35% duty on Canadian imports and blanket levies of 15% to 20% on most other trade partners starting August 1."Now it's not a question of should you own silver or not...it's about how much do you own," said Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, highlighting the urgency gripping silver bulls.The white metal's explosive move comes as gold veterans sound the retreat. Gautam Shah of Goldilocks Premium Research, who rode gold from $1800 to $3500, abandoned his position last month. "Most of the positives were priced in and it has gone into a longish consolidation phase which is going to continue. But over the last few months we have been very-very bullish on silver," Shah said.His confidence in silver's potential is staggering. "If you have to take a 12- to 15-month view, I think $43 I would say is a medium-term target and $50 on silver is probably a slightly more longer-term target," Shah predicted.The shift reflects more than just profit-taking. Speculators are showing a stronger preference for silver over gold, likely due to the stretched gold-to-silver ratio and the prospect of silver prices catching up to gold's recent gains. Silver also benefits from supportive supply-demand dynamics, with the global market facing its fifth straight year of deficit. Motilal Oswal Financial Services , which had been bullish on gold since Rs 30,000 levels targeting Rs 50,000, called it quits earlier this month. "We've witnessed gains exceeding 30%, and historical data over the past 25 years shows that Comex gold has never achieved more than 32% returns in a single year," the brokerage noted, adding that "some signs of market fatigue are also emerging at these higher levels."The supply threat adds another explosive element to silver's story. "Silver is already in short fall. If US or other nations were to announce similar tariffs on silver or even worse ban exports like China has done in case of rare earth minerals then it could send silver prices to stratospheric levels," warned Sheth.The backdrop couldn't be more supportive of precious metals. The dollar index has dropped close to 10% over the last six months and about 10% since the beginning of this calendar year, according to Emkay Wealth Management. "This has already been priced in the gold prices in the international markets, but what we need to see is a further fall in the dollar caused by official rate cuts and a fall in market yields," the wealth manager noted.Emkay highlighted two key factors driving precious metals: the direction of US interest rates and an anticipated decline in the US dollar. "Given the economic conditions and the relatively lower inflation numbers, the likelihood of the Fed going in for a rate cut or two before the end of this calendar year is very high," the firm said.However, the new budgeted spending to the tune of $4.60 trillion could complicate matters. "The situation could become murkier because the resultant borrowings may put upward pressure on the yields," Emkay warned.For now, silver appears to be the precious metal of choice for those seeking the next big move. As Shah puts it: "If you are booking profits in gold, this might be a good time to top up on silver. Looks like a large mega trend is coming for this commodity."The question for investors is no longer whether to own precious metals, but which one will deliver the bigger payoff in the months ahead.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)