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Gold-Silver Ratio Hits Multi-Month Low
The gold-silver ratio (GSR) has compressed significantly, falling to 55.62 within a month. This marks a period where silver has notably outperformed gold, a trend amplified by geopolitical tensions in West Asia and elevated oil prices.
India's Duty Hike Sparks Silver Sell-off
Following India's 15% duty hike on precious metals, silver and gold futures experienced sharp declines on MCX. Traders engaged in profit-booking after an extraordinary rally. Silver futures for July delivery dropped 6.82 percent to Rs 2,71,259 per kilogram, while June gold contracts fell 1.93 percent to Rs 1,58,850 per 10 grams as of Friday afternoon. Silver prices, which had surged above Rs 3 lakh per kg post-announcement, collapsed by nearly Rs 20,000 from their peak in just two sessions.
Analysts: Silver's Momentum Meets Volatility
Commodity analysts observe that a GSR near 56 indicates stronger momentum for silver, supported by industrial demand and speculative flows. Nirpendra Yadav, Senior Research Analyst at Bonanza, notes a market shift from defensive gold to higher-beta precious metals, with silver entering a more volatile phase.
The long-run historical average GSR stands between 55 and 60. Renisha Chainani, Head of Research at Augmont, stated that a ratio close to 56 places silver in a historically strong position relative to gold. Historically, when the GSR exceeds 60, silver tends to outperform gold over the subsequent 12-24 months.
Expert Advice: Balancing Gold and Silver Holdings
Chainani advises that with the GSR near 56, both metals are in a historically balanced range. She suggests retail investors consider a split allocation, favoring gold by a ratio of roughly 3:1 or 4:1 by value. For silver, systematic accumulation via digital silver or SIPs in silver ETFs is recommended over lump-sum physical buying at current elevated prices, given silver's higher downside volatility compared to gold.