Silver, zinc prices have surged. Is a stock linked to these metals worth a bet?

But is this the right time to invest in silver at ₹100,000, or should investors look at companies positioned to benefit from rising silver prices? In other words, buy the metal—or the company that makes the metal?

Silver, though less popular than gold, is a highly traded precious metal valued both as a store of wealth and a medium of exchange. Early 2024 marked the beginning of a robust bull run for silver. From a low of $22.60 in February, it surged to around $34.54—a remarkable 52% gain in just ten months.

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Several factors are driving this rally. Geopolitical tensions and recession fears are boosting silver’s appeal as a safe-haven asset, though it still trails gold in that role. With gold at all-time highs, silver could soon surpass its 2011 peak of $49.

On the technical front, silver has been forming an ascending triangle pattern on the monthly chart since 2021. Last month’s breakout was followed by sustained buying pressure, and the 14-period Relative Strength Index (RSI) remains firmly in bullish territory. Silver has now crossed the $30 mark for the first time in a decade, with the size of the triangle signalling substantial upside potential in the months ahead.

Zinc’s recovery

There’s a reason I’m focusing on zinc, and it will become clear later. Bear with me.

Zinc prices saw a sharp decline between May 2022 and May 2023, falling from $4,500 to $2,250. However, since February 2024, prices have staged an impressive rebound, climbing 37%. This recovery can be attributed to the Federal Reserve’s recent monetary policy easing and China’s stimulus efforts aimed at reviving its struggling property sector.

Zinc is now trading at a 15-month high, surpassing $3,100 per ton. A look at the monthly price chart shows the metal finding solid support along a rising trend line. The 14-period RSI has gained momentum, staying above the 50 mark—indicating bullish sentiment. If prices continue to hold above the $3,000 level, further upside appears likely in the coming months.

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Hindustan Zinc: Riding the wave of zinc and silver

Hindustan Zinc Ltd is the second-largest integrated zinc producer in the world and the third-largest silver producer globally. It also holds the distinction of being the only listed integrated precious metals company in India. Now, you see why the earlier focus on zinc matters, right?

The company operates the world’s largest underground zinc mine at Rampura Agucha, Rajasthan, and ranks as the second-largest silver producer at Sindesar Khurd in Rajasthan.

Hindustan Zinc has delivered exceptional performance in the current financial year. It achieved its highest Ebitda margin in eight quarters, exceeding 50%—a 450-basis-point increase year-on-year. Notably, the silver segment’s contribution has remained consistently above 40%. The company’s revenue for the June ended quarter reached ₹8,300 crore, marking a 22% year-on-year increase, driven by higher volumes and rising prices of both zinc and silver.

Since April, Hindustan Zinc’s stock has trended upward, buoyed by global stimulus measures and rising zinc prices. The stock surged 180% from April to June. However, following this rally, it experienced time and price corrections, declining from ₹778 to ₹465 between May and August—a 40% drop. This correction, however, occurred on low trading volume, hinting at reduced investor participation and the potential for a trend reversal.

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The stock has now established several long-term support levels. Fibonacci retracement analysis shows key support at the 50% and 61.8% levels, around ₹524 and ₹464, respectively. The stock is currently consolidating within this range, forming an ascending triangle pattern, with momentum indicators showing strength and positive divergence.

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With favourable technical signals and strong fundamentals, Hindustan Zinc appears poised for further price appreciation. As a leading producer benefiting from the rising zinc and silver markets, the stock holds significant potential for generating robust returns over the next year.

Metal or the stock?

The decision between investing in silver or stocks linked to the metal ultimately depends on individual goals and market outlook. Silver, with its safe-haven status and recent bullish momentum, appeals to those seeking stability and potential appreciation.

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On the other hand, investing in stocks—particularly in companies like Hindustan Zinc, which benefit from rising metal prices—can offer greater growth potential along with the added advantage of dividends. A balanced approach that incorporates both assets might be the most prudent strategy, enabling investors to capitalize on the strengths of each while managing risks effectively.

Disclaimer: This article is intended solely to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you are considering an investment, please consult your financial advisor. This content is strictly for educational purposes.

About the author: Kiran Jani brings over 15 years of experience as a trader and technical analyst in India’s financial markets. He is a recognized expert on business channels and has previously worked with firms such as Asit C. Mehta, Kotak Commodities, and Axis Securities. Currently, he heads the Technical and Derivative Research Desk at Jainam Broking Ltd.

Disclosure: The writer and their dependents do not hold the stocks discussed in this article. However, clients of Jainam Broking may or may not own these securities.