Silver Price Crosses ₹4,00,000 per Kg: Is the Rally Justified?

Silver prices have hit a fresh milestone in India, with silver trading at around ₹4,10,000 per kg as of 29 January 2026. This sharp rise has surprised many investors, especially because prices have moved up very fast in a short period. Naturally, the big question now is whether this rally is driven by real fundamentals or if it is getting stretched by market sentiment.

Why Silver Prices are Rising

Silver is not just a precious metal used for investment and jewellery. It is also a critical industrial metal. Over the past few years, global silver supply has struggled to grow, while demand has continued to rise. Mining output has been largely flat, creating a long-term supply gap that supports higher prices.

Industrial demand plays a major role here. More than half of the world’s silver consumption now comes from industries. Solar panels, electric vehicles, electronics, batteries and advanced technologies all require silver. With renewable energy expansion and rising tech usage globally, silver demand has become more structural and long-term in nature.

Silver is also benefiting from its role as a safe-haven asset. Ongoing geopolitical tensions, trade conflicts and economic uncertainty are pushing investors toward precious metals. When risk levels rise, silver often moves up along with gold.

Macro factors are adding further support. Expectations of lower interest rates and phases of US dollar weakness make non-interest-bearing assets like silver more attractive. On top of that, strong buying from retail investors and inflows into silver ETFs and futures have amplified the recent rally.

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What the inventory data really shows

A common argument behind the price surge is a shortage of physical silver. However, London Bullion Market Association data tells a more balanced story. Silver inventories in London vaults, which had dropped earlier, actually rebuilt through late 2025. By December 2025, stocks were at relatively healthy levels.

This means the recent price jump did not happen because silver suddenly disappeared from the market. Prices rose even when inventories were stable or increasing. This points to sentiment, expectations and fear of future supply disruptions playing a bigger role than immediate physical scarcity.

Is the silver rally justified?

The answer depends on the time frame. From a medium to long-term perspective, the rally has strong support. Industrial demand is real and growing, especially from clean energy and technology sectors. Supply growth remains limited, and geopolitical uncertainty continues to support safe-haven demand. These factors justify higher silver prices over time.

However, there are also reasons to be cautious. Silver is much more volatile than gold. Prices can rise very fast and fall just as sharply. If prices stay too high for too long, industrial users may try to cut usage or shift to alternatives, which can reduce demand. This is known as demand destruction.

The speed of the recent rally also suggests a strong momentum and sentiment element. When prices are driven more by emotion than fundamentals, corrections can be sudden and deep if sentiment changes.

What this means for investors

Silver has strong long-term drivers in its favour, including industrial demand and supply constraints. At the same time, the current rally carries higher risk due to its sharp pace and speculative participation. Volatility is likely to remain high, and price swings can be large.

Final takeaway

Silver crossing ₹4,00,000 per kg reflects a mix of solid fundamentals and strong market sentiment. While the long-term outlook remains positive, the current rally looks partly stretched. Investors should not expect a straight-line rise and should be prepared for sharp ups and downs along the way.

Disclaimer

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