Silver on fire in India By Shivom Seth |
Friday , 29 Apr 2011
Sensing a price hike, investors in India are hoarding up
on the white metal. With demand expected to jump by 10%
to 15% from the current level of about 3,000 tonne a year.
MUMBAI - Despite a 100% jump in price in just over six
months from October 2010, demand for the silver metal refuses
to die in India.
Traders and analysts insist that silver demand will climb
further this year, as investors across the country pick
up on their purchases sensing an even bigger price-hike
around the corner.
On October 26, 2010, silver was quoting around $ 799.96
a kilo in Mumbai. At Thursday's closing price of around
$ 1,647.36, the increase is over 100%, in just six months.
``Silver prices are set to extend a record rally,'' said
Ketan Shroff, managing director of Pushpak Bullions in Mumbai.
``Consumers are rushing in to grab more for the forthcoming
Akshaya Tritiya festival,'' he said.
Akshaya Tritiya falls on May 6 this year. It is considered
an auspicious day, the golden day of eternal success. Many
bullion houses are offering their customers an advance booking
on the white metal to neutralise the impact of rising prices.
Though gold coin sales have picked up over the last week
in tandem, jewellers insist that there is huge demand from
families who have been known to the jewellery house for
decades. The weakening of the rupee and rising inflation
have further contributed to the high prices.
The bullion markets here tracks overseas prices. Silver
(0.999 fineness) was quoted at $ 1,691.34 a kilo on April
25, 2011, in Mumbai, as against $ 1,064.37 on January 1,
2011, revealing a jump of 58.9%.
During this period, standard gold has risen by only 6.53%
from $465.491 per 10 gram to $ 495.984 for every 10 gram.
``The white metal has beaten gold in terms of returns given
to investors both last year and this year so far. Gold may
have the glamour, but silver has the momentum right now,''
Anjani Sinha, chief executive officer of the Mumbai-based
bourse, the National Spot Exchange, said to a news agency.
While production bottlenecks due to a rise in mining costs
have added to supply constraints, factors such as increasing
industrial applications have created a fresh demand, she
added.
Demand is expected to jump by 10% to 15% from the current
level of about 3,000 tonne a year, she further said.
Traders pointed out that silver trading on the National
Spot Exchange has increased by around 20% in the past month.
Moreover, they added, the ratio of gold to silver has dropped
to the lowest level since September 1980.
Silver futures
At the Multi Commodity Exchange, silver for delivery in
May shot up by 3.60% to $ 1,607.24 per kilo, with a trade
volume of 7,023 lots.
It had ended at $ 1,551.57 per kilo in the previous session.
Similarly, the metal for delivery in September gained 3.59%
to $ 1,633.30 per kilo, with a business turnover of 287
lots.
The white metal for delivery in December spurted by 3.52%
to $ 1,652.89 per kilo, with a turnover of 114 lots.
Analysts maintain that the rally in silver futures was
mostly driven by a firming trend overseas, after the dollar
weakened further.
In the last 10 years, silver prices have increased more
than 10 times, according to Jayantilal Challani, president
of the Madras Bullion Association.
He attributes the rise to factors such as increase in industrial
usage, hedging, dollar depreciation and speculation. He
noted that there was heavy demand for silver in China and
Africa, ``as the industrial usage in these regions is high.
The demand is set to surge here too.''
Silver to jump
Traders insist that sentiments will continue to remain
bullish with mounting inflation around the globe and Europe's
sovereign debt crisis prompting investors to seek a store
of value.
``In global markets, gold rose by 0.1% to $1,488.68 an
ounce and silver rose by 0.9% to $43.37 an ounce, the highest
level since 1980,'' said Mohan Seth, an analyst with a brokerage
firm here.
He added that besides hectic buying by stockists and jewellers
for the upcoming marriage season, many investors were shifting
their funds from the melting stock markets.
Bank premiums on silver have also doubled over the past
five days to 28 cents an ounce. An analyst with a foreign
bank said: ``Every three out of five calls we receive in
our dealing rooms relate to queries on buying silver. Demand
will rise further.''