Is the Silver Rally Indicating a Physical Supply Crisis? Prices Set to Hit Rs 2.46 Lakh per Kg
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Synopsis
The silver market is on a transformative journey driven by supply challenges, with prices projected to reach Rs 2.46 lakh per kg. This report sheds light on the significant factors and implications of this shift.
Key Takeaways
- Silver prices are forecasted to reach Rs 2.46 lakh per kg.
- Persistent physical supply deficits are affecting prices.
- The market shows structural rather than cyclical trends.
- Ongoing inventory drawdowns indicate limited silver availability.
- Investors are encouraged to maintain a buy-on-dips strategy.
New Delhi, Dec 29 (NationPress) The silver market experienced a significant structural transformation in 2025, attributed to ongoing physical supply deficits, depletion of inventories, and constraints imposed by policy, as outlined in a report released on Monday.
This analysis by Motilal Oswal Financial Services Ltd forecasts that silver prices may reach Rs 2,46,000 per kg within the domestic market.
The brokerage advocates maintaining a buy-on-dips strategy with a gradual investment plan.
“Having achieved the initial target of $75 on COMEX, we are reaffirming our target at $77 on COMEX, which corresponds to Rs 2,46,000 in the domestic market, with additional adjustments contingent on market trends,” the report stated.
This rally is not merely speculative; it underscores serious discrepancies between paper pricing mechanisms and actual physical availability, as tightening physical supply and dwindling exchange inventories suggest that this rally is fundamentally structural rather than cyclic.
Navneet Damani, Head of Research – Commodities at Motilal Oswal Financial Services Limited, commented, “The growing gap between paper pricing and physical availability indicates deeper issues within global price discovery frameworks.”
The brokerage noted that stocks on COMEX and inventories in Shanghai have continued to decline throughout 2025.
The persistent premium of Shanghai spot silver prices over COMEX futures, often fluctuating between $5 and $8, reflects a lack of adequate physical supply necessary for price convergence, rather than mere temporary pricing anomalies.
Commodities Analyst Manav Modi from Motilal Oswal Financial Services Ltd pointed out that ongoing inventory drawdowns in key global markets, diminishing arbitrage between Shanghai and COMEX, and consistent delivery pressures have highlighted the restricted availability of deliverable silver.
The report also indicated that CY25 marked the fifth consecutive year of physical deficits in the silver market, where mine supply has been unable to keep pace with the combined demand from industry and investment.
During this year, silver prices soared to historic highs, surpassing $75 on COMEX and exceeding Rs 2.3 lakh in the domestic market, achieving over 160 percent gains.
Point of View
It is evident that the structural changes we are observing are significant. As the nation navigates through these dynamics, it is crucial to remain informed and proactive regarding investment strategies.
NationPress
01/01/2026
Frequently Asked Questions
What is causing the surge in silver prices?
The surge is primarily due to persistent physical supply deficits and inventory depletion, compounded by policy-driven supply constraints.
What is the predicted price of silver?
According to Motilal Oswal Financial Services Ltd, silver prices are expected to reach Rs 2,46,000 per kg in the domestic market.
What should investors do in this market?
Investors are advised to adopt a buy-on-dips strategy with a staggered investment approach, as per the brokerage's recommendations.
How does the physical supply impact pricing?
The disconnect between paper pricing and physical availability indicates significant stress in the market, affecting overall pricing mechanisms.
Is this rally a temporary trend?
No, the rally is seen as structural rather than cyclical, driven by ongoing supply challenges.
