Silver rallies 4% ahead of Diwali: Buy now or wait for prices to cool?

With just 2-3 days left for Diwali, silver prices have sprung a surprise, rising sharply in the domestic market. The precious metal gained around 4% on the Multi Commodity Exchange (MCX) on Wednesday, even as international silver prices remained under pressure. So, is this the start of another rally ahead of the festive season, or could prices see a correction before Diwali?At the time of writing, MCX Silver was trading at Rs 1,86,890, up nearly 4%, at around 2.48 pm. The sharp rise comes as buyers and investors keep a close watch on precious metals ahead of the festival, when demand for silver coins, jewellery and other items typically picks up.WHY ARE SILVER PRICES RISING?The domestic silver market has seen a strong recovery, supported by movements in the broader commodity market and currency trends.On the macroeconomic front, WTI crude oil prices eased towards the $95-per-barrel mark, offering some relief after recent elevated levels. The Indian rupee also extended its gains, trading around Rs 94.60, supported by the moderation in crude oil prices. However, the domestic rally stands in contrast to international market trends. COMEX Silver was trading 0.84% lower, raising questions about whether the sharp rise in Indian prices can be sustained.According to Ponmudi R, CEO of Enrich Money, MCX Silver futures opened with a gap-up near Rs 1,83,780 and continued to trade around those levels, gaining 2.27% and significantly outperforming domestic gold. He said silver prices were holding within the Rs 1,80,000-1,86,000 range, with immediate resistance placed between Rs 1,86,000 and Rs 1,88,000.WILL SILVER PRICES RISE FURTHER BEFORE DIWALI?With the festival just days away, the big question for buyers is whether silver can extend its gains.Ponmudi said a sustained breakout above the Rs 1,86,000-1,88,000 resistance band could open the way for silver to move towards the next resistance zone of Rs 1,94,000-1,96,000.However, investors should not assume that the rally will continue in a straight line. The technical indicators suggest that the market still faces some weakness."The RSI, hovering around 29, indicates that silver remains close to oversold territory, while the MACD histogram continues to reflect negative momentum," Ponmudi said.He also cautioned that the sharp recovery in domestic silver prices contrasts with the weakness in international markets, where COMEX Silver was trading lower by 0.84%.This divergence raises the possibility of domestic and international prices moving closer to each other. If global silver prices remain under pressure, a pullback in domestic prices towards Rs 1,80,000 cannot be ruled out.At the same time, silver's industrial demand could provide some underlying support to prices.WHAT SHOULD SILVER INVESTORS DO NOW?For investors, the sharp rise ahead of Diwali calls for caution rather than rushing to buy simply because prices are moving higher.Ponmudi said the near-term outlook remains cautious, with a sustained move above Rs 1,86,000-1,88,000 needed for the recovery to continue.On the downside, Rs 1,78,000-1,80,000 is the immediate support zone. If prices break below this range decisively, the next support could come between Rs 1,70,000 and Rs 1,72,000.For those already holding silver, it may be important to track these support and resistance levels rather than make decisions based on short-term price movements.Fresh investors, meanwhile, should avoid chasing a sharp rally and consider their investment horizon and risk appetite before entering the market. Those buying silver for Diwali should also remember that domestic retail prices can differ from MCX rates because of purity, making charges, taxes and dealer margins.With only a few days left for Diwali, silver could see further movement in either direction. A sustained break above Rs 1,88,000 may strengthen the bullish case, but continued weakness in global markets could trigger a correction. For now, investors may be better off watching the key price levels instead of making hurried decisions.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- Ends