How Will Silver Fare In 2026?

New investors should enter gradually and with a long horizon.
'Staggered investment through systematic purchase plans is advisable rather than lump-sum buying.'

Silver closed at Rs 379,988 per kg on January 29. The metal has surged 159.1 per cent over the past three months and 319 per cent over the past year. Experts say investors need to turn cautious after such a humongous runup.

Safe-haven demand is up

Strong investment demand, a widening supply deficit, and robust industrial consumption have driven the price of silver higher.

"Safe-haven allocation alongside gold has accelerated amid eroding confidence in the US dollar. President Donald Trump's criticisms of the Federal Reserve, expansive fiscal policies amid rising debt, unpredictable tariffs, and fears of currency debasement have reinforced this trend," says Kaynat Chainwala, assistant vice president, commodity research, Kotak Securities.

Geopolitics has added to demand.

"President Trump's threats to resource-rich nations such as Greenland, Cuba and Mexico, following military action in Venezuela, have highlighted the escalating global competition for critical minerals," says Chainwala.

Central banks have also played a part. "Expectations of US Federal Reserve rate cuts, along with continued accumulation by central banks and sovereign entities, have further amplified investor interest," says Riya Singh, research analyst, commodities and currency, Emkay Global.

Industrial demand remains firm. Electric vehicle manufacturing, solar panel production and expanding data centres continue to drive consumption. On the supply side, acute physical shortage has created a squeeze and deepened a multi-year deficit.

"China's silver export controls, implemented on January 1, 2026, could intensify the physical supply squeeze," says Chainwala.

These above-mentioned factors could continue to support the rally over the next six to 12 months as well.

What could trigger a correction

Silver's gains could stall if risk sentiment improves.

"If geopolitical tensions across the globe ease, investors may rotate funds away from safe-haven assets towards riskier assets, potentially triggering a price correction," says Deveya Gaglani, senior research analyst - commodities, Axis Securities.

A stronger US dollar would also weigh on prices. Sentiment-driven moves also remain a key risk.

"Unwinding of speculative premiums -- especially in Indian silver exchange-traded funds -- can trigger aggressive selling. Premium collapses and high volatility can drive sharp declines even if fundamentals do not reverse, as seen recently," says Singh.

Policy shifts could also put pressure on domestic prices.

A weaker US economy could reduce AI and renewable-energy demand, which supports industrial consumption.

High prices could also push industrial users to explore alternatives to protect margins.

"If viable substitutes emerge, the euphoria could fade," says Gaglani.

Risks have risen

Silver remains inherently volatile because it plays the role of both a safe-haven metal and one that has industrial usage.

'While physical shortages remain, the rally has increased timing and valuation risk,' says Singh.

Profit-taking after a sharp rise can trigger sizeable corrections.

Recent price action has been extreme, with near 4 to 7 per cent daily swings seen almost every day last month.

"Such volatility can unsettle retail participants who lack risk-management mechanisms," says Gaglani.

New investors: Enter cautiously

New investors should enter gradually and with a long horizon.

"Staggered investment through systematic purchase plans is advisable rather than lump-sum buying," says Singh.

They should adopt a 5 to 10 year horizon and keep allocation limited to 20 to 30 per cent of the precious-metals bucket (not more than 5 to 7 per cent of the total portfolio).

Existing investors should rebalance

Existing investors in silver can maintain allocation, as scarcity and premiums may persist. They should avoid panic selling on dips or chasing highs.

Those whose portfolio weight has exceeded their original allocation can book partial profits but should avoid a total exit.

They can continue with monthly systematic investment plans (SIPs) to average out their purchase price.

Singh suggests treating sharp price dips as opportunities for strategic purchases.

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Feature Presentation: Aslam Hunani/Rediff