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Indian households have long treated precious metals, such as gold and silver, as a store of wealth. In fact, many Indians consider it auspicious to buy these precious metals around Dhanteras and Diwali. However, apart from being shiny and attractive, many people are not aware of the industrial applications of these precious metals, especially silver. In fact, almost 50% of silver demand is for industrial applications.
Silver’s excellent conductivity, malleability and ductility make it highly useful in electronics.
Importantly, silver is set to play a pivotal role in the transition to clean energy. For example, each solar cell uses almost 100 mg of silver. As the demand for solar panels increases, the amount of silver required for solar panels is expected to rise 39% to 4,548 tons on average over 2022-25, compared to 3,267 tonnes at the end of 2021.
Increasing share of electric vehicles (EVs) in the automobile market is also expected to increase silver demand, as EVs use almost twice the silver used in traditional internal combustion engine (ICE) cars.
Charging stations are also expected to increase the demand for silver. The total demand for silver for automotive applications is expected to rise 46% to 2,980 tonnes on average over 2022-25, compared to 2,047 tonnes at the end of 2021.
Thus, silver could be critical to achieve ESG goals globally. The additional demand for these applications may not be met with an adequate increase in supply, which could lead to rising silver prices over the medium to long-term.
The remaining 50% of demand for silver comes as a precious metal for jewellery and investment. Investors treat silver as a hedge against currency depreciation and hence wish to hold it as an investment. Investors can treat silver as part of their core asset allocation as it has historically had a low correlation with equities, and thus adds diversification to the portfolio.
Silver ETF schemes allow investors to get exposure to silver and remove two key problems investors face when investing in physical silver.
First, it is difficult for individuals to store large quantities of silver physically as it is voluminous metal. Second, it is difficult for individual investors to ensure they are buying high quality silver.
In contrast, all the physical silver our scheme purchases is in line with the good delivery standards of London Bullion Market Association (LBMA), and hence has the fineness of 999 parts per thousand, which is considered as good quality for physical silver. Thus, our scheme makes it easy and convenient to invest in silver.
The schemes are available for all, since a demat account is not required. Smart options like SIP, STP are available and the scheme offers ease of investing in small amounts. Moreover, investors can start their investment journey in silver this Dhanteras and Diwali with a minimum investment of just Rs 100.
(The author is Executive Vice President & Co-Head – Sales & Distribution at
Asset Management)