Silver’s record run faces a budget speed bump? Duty cut could dent prices, HDFC Securities warns

Silver’s blistering rally to record highs may be vulnerable to an abrupt reversal if the government pares import duties in the upcoming Union Budget, according to HDFC Securities, which cautioned that any such move could put immediate pressure on domestic prices even as the long-term outlook for precious metals remains bullish.

Silver futures on the Multi Commodity Exchange vaulted past Rs 3 lakh per kg on Monday, reflecting the metal’s renewed appeal as a hedge amid global uncertainty. But HDFC Securities said in a research report that while structural drivers for gold and silver remain firmly in place, a reduction in import duties could act as a near-term headwind for prices in India. “However, if the government reduces import duties on gold and silver in the upcoming budget, domestic prices could come under pressure and could act as a short-term headwind for domestic prices,” the brokerage said.

Budget risk to a crowded trade

The warning comes at a time when silver has been outperforming gold, buoyed by a rare combination of supply constraints and demand tailwinds. HDFC Securities noted that 2025 marked the fifth consecutive year of a global supply deficit in silver, with cumulative shortages over 2021-2025 nearing 800 million ounces, almost equivalent to a full year of mine supply. Industrial demand has remained at record levels, while investment inflows and inventory drawdowns across major global hubs have tightened the market further.

Yet for Indian investors, domestic prices are also shaped by fiscal policy. Any reduction in import duties would mechanically lower landed costs, potentially triggering a pullback in rupee-denominated prices even if global benchmarks remain elevated. Such a move, analysts said, could prompt short-term profit-taking after the metal’s steep run-up.

Long-term bullish, short-term volatilityDespite flagging the budget-related risk, HDFC Securities maintained a constructive medium-term to long-term view on silver. The brokerage pointed to robust industrial usage, persistent supply deficits, dovish monetary policy expectations and a sharp compression in the gold-silver ratio, from around 90:1 in early 2025 to about 57:1, as factors that continue to favor silver over gold.The brokerage expects the broader bullish trend in precious metals to extend into 2026, even if gains moderate after last year’s outsized rally. It reiterated that structural demand from investors and institutions has created a floor under prices, while geopolitical risks and trade-policy uncertainty continue to underpin safe-haven demand.

Portfolio allocation advised

Against this backdrop, HDFC Securities recommended that investors allocate up to 10% of their portfolios to precious metals, with flexibility to increase exposure based on individual risk appetite. The brokerage said its bullish view could be captured through exchange-traded funds, while cautioning that policy-driven volatility around the budget could create short-term swings.

For now, silver’s surge reflects a powerful mix of global forces. Whether it can sustain record levels in the domestic market may hinge less on geopolitics or supply deficits, and more on what the finance minister chooses to do with import duties in the weeks ahead.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)