Page 56 - Banking Finance June 2025

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pected to rise as governments strive for net-zero emissions. ver, similar to previous periods of monetary easing. Addi-
Additionally, advancements in artificial intelligence and high- tionally, raising global debt and fiscal instability enhance
performance semiconductors, which depend on silver's un- silver's appeal as a safe-haven asset.
matched conductivity, further boost demand. These factors
position silver as one of the most sought-after commodities Gold-Silver Ratio (GSR)
of 2025.
The gold-silver ratio (GSR) has declined from its one-year
high but remains elevated at over 88.9 points, compared
Supply Deficits Add to Price Pressure to its long-term historical average of around 60 points. The
For several years, silver has experienced a supply deficit, current gold silver ratio enhances silver's appeal as an in-
with demand consistently surpassing mine production. In vestment opportunity. During the 2008 financial crisis and
2024, the silver market saw a shortfall of over 200 million Great Recession, the GSR initially spiked to over 80:1 be-
ounces, the largest in recent history. Experts anticipate this fore falling to 30:1 as the Federal Reserve ramped up money
trend will persist in 2025, exerting further upward pressure printing. Similarly, in 2020, the GSR hit a record high of
on prices. 123:1 during the pandemic before plunging to around 60:1
Source: Silver institute as central banks injected liquidity into global economies.
Source : Refinitiv
Monetary Factors Driving Silver Higher
Beyond industrial demand and supply constraints, macroeco- Conclusion

nomic conditions are favouring silver. Silver shares many With industrial demand surging, supply deficits persisting, and
monetary drivers with Gold, such as inflation, central bank macroeconomic factors aligning, silver is shaping up to be one
policies and currency devaluation. of the most promising investment opportunities of 2025.

Historically, silver tends to perform well in low-interest-rate While gold remains the cornerstone of wealth preservation,
environments due to its lower opportunity cost of holding, silver's dual nature as a monetary metal and industrial pow-
a weaker US dollar, inflation fears, higher industrial and in- erhouse positions it as a potential standout performer. In-
vestment demand. The Federal Reserve's anticipated rate vestors seeking to diversify their portfolios may find silver
cuts in 2025 could create a favourable environment for sil- increasingly appealing as 2025 unfolds.

RBI's OMO Auction Draws Rs. 71,000 Crore in Bids

The Reserve Bank of India's (RBI) recent open market bond purchase auction drew overwhelming interest, with bids
totalling Rs. 71,194 crore-almost three times the notified Rs. 25,000 crore. Bonds maturing between 2029 and 2036
were on offer, with 2035 bonds alone receiving bids worth Rs. 28,612 crore.
The strong demand, especially for semi-liquid papers, reflects market optimism and expectations of further liquidity
support. Treasury officials noted the discount to market price has narrowed, indicating less aggressive selling. The RBI
is set to conduct another Rs. 25,000 crore OMO on May 19. Meanwhile, yields on recent Treasury bill auctions have
flattened, suggesting reduced short-term borrowing costs.

The 91-day, 182-day, and 364-day T-bills had cut-off yields of around 5.84%, reflecting system liquidity surplus and easing
rate pressures. The RBI's calibrated OMO strategy aims to manage liquidity without overheating the bond market.

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