Silver rally supported by multiple tailwinds, but valuation concerns could trigger volatility in 2026 : Axis Mutual Fund

With silver prices hitting a historic high of Rs 2 lakh/kg on the MCX on Friday and posting solid gains after FOMC meeting outcomes, Axis Mutual Fund cautions investors to be mindful of potential risks as we are about to enter 2026.

According to a release by the fund house, overvaluation leading to any weakness in physical demand, potential ETF outflows, profit taking could weigh on the prices and overall, outlook for silver is constructive with multiple tailwinds sustaining its rally even as valuations stretch. However, 2026 may bring corrections and volatility as investors reassess valuations.

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The fund house further adds that stronger US Dollar, rising real yields, easing geopolitical tensions, any downturn in copper prices and rotation into energy or agricultural commodities could also lead to downward pressure.

Further central banks’ preference for gold over silver may limit its official demand support and possible substitution in industrial uses also poses a risk. The year 2025 has cemented silver’s position both as a precious and industrial metal of choice, positioning the white metal as a standout asset in diversified portfolios.

Axis Mutual Fund while mentioning the performance drivers of silver said that they were similar to that of gold including weaker US dollar, Fed Policy uncertainty, geopolitical concerns, economic uncertainty and Japanese Bond Market turmoil.

Some other factors that led to the surge in silver prices were broader momentum in metals, demand led by industrial use, shift in flows, and structural shortage.


The note said that silver prices surged to fresh highs in 2025, aided by broader momentum in metals, the price of the white metal was supported by higher levels for copper, reflecting industrial demand crossover and gains in gold also provided additional tailwinds.

At present, industrial demand for silver accounts for more than half of its total consumption. Silver is used in solar energy technology, electric vehicle batteries and semiconductors - all of which are expected to be in high demand in the foreseeable future and the green transition will continue to underpin long-term silver demand.

The strong inflows into silver-backed ETFs highlight investor confidence and though modest, physical buying provides underlying support to silver prices. Investors rotating from equities into commodities added to the silver’s price momentum.

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The fund house further added that Silver supply remains inelastic amid rising prices as majority of mined silver is produced as a by-product of lead, zinc and copper mining. 2025 marks the fifth consecutive year where global silver supply lagged the demand, leading to market deficit.

Commenting on the counterpart - gold, the fund house said that overall, while gold retains long term support from persistent Central Banks’ purchases and safe haven demand, 2026 may bring bouts of correction and volatility.

“However, in the near term, we have a positive bias on gold, supported by safe haven flows given the backdrop of global uncertainty,” the note said.

The note also mentioned that, “ As we enter 2026, many of the drivers that fuelled gold’s rally in 2025 may continue to provide support, however investors need to be mindful of potential headwinds that may temper the momentum. Higher real yields, a stronger US dollar, higher global growth, reduced inflationary pressures, and hawkish US policy stance may erode demand. Additionally, profit-taking, weaker ETF inflows, commodity rotation into industrial metals and easing geopolitical risks could also weigh on the prices.”