Silver Sees Boost from Indian Demand and Retail Investors

Silver continues to underperform gold, but it has its own strengths. One key factor is the growing demand for physical silver in India. According to Bloomberg, imports have rebounded to nearly 90 tons in August after a significant reduction in May due to a new licensing system.

This system, introduced by the Indian government, aimed to reduce the current-account deficit and preserve foreign-exchange reserves. As a result, premiums for silver have fallen to around $4 per ounce, encouraging flows from other parts of the world into Asia. This development is seen as bullish for XAG/USD quotes.

Another factor supporting silver is the strong base of retail investors waiting for the right opportunity to enter the market. The consolidation in silver prices during June and July redirected capital toward stock markets, particularly AI stocks. However, with the end of the US corporate earnings season, support for Big Tech may wane, potentially leading to renewed momentum in the XAG/USD rally.

The outlook for precious metals remains solid, with a favorable stagflationary environment likely to benefit gold and silver. Geopolitical tensions combined with a slowing US economy could create an ideal backdrop for silver to deliver a pleasant surprise.