Silver Prices Could Benefit from Indian Demand

Safe haven demand, as well as the upcoming wedding season, could see silver prices following gold's recent rise...

ON THE back of Dollar weakness, Silver Prices jumped on Monday, writes MineWeb's Shivom Seth in Mumbai.

Traders pointed out that the price of the white metal has almost doubled from $630.38 per kilo last year in July to $1300.51 per kilo this July. 

Over the last four years, even as the global markets have been uncertain, silver has proved to be an ideal investment and has provided huge returns to investors, traders said. 

"There is huge demand from investors and even soaring industrial demand has affected the Silver Price in India,'' said Somantilal Shah, bullion retailer. 

Between August 2010 and April 2011, Shah added, Silver Prices climbed around 175% and fell 33% after which "everyone has been waiting for a bull run.''

Traders said brisk buying by stockists and investors amidst reports of a firming trend in the overseas markets, led to a rise in Silver Prices. Gold in global markets, which normally sets a price trend on the domestic front, rose by $11 to $1,777.20 an ounce as inflation in China boosted investor and central bank demand.

As Asit Majordia, economic analyst at an investment bank points out in a note to his clients, China's major economic indicators slowed in July. The year-on-year growth in industrial output decelerated slightly to 14% in July, 1.1% lower than in June. 

"However, that figure is still higher than the historic low of 13.3% registered in May. China's inflation accelerated to a 37-month high in July on surging food costs, putting the government in a tough position with worsening global liquidity in sight. High inflation will ensure that more people in China will move to precious metals. This will also be reflected in India, which is also battling painful inflation,'' said Majordia.

Tarodimull Chetan, a bullion retailer, was of the opinion that silver demand in China and India "has increased sharply in recent years as more investors use silver as a store of value. Investors in both India and China are Buying Silver to hedge market losses. With stock markets uncertain this year, silver has turned out to be an ideal investment for most investors.''

Bullion management firm CommTrendz Research and Fund Management's senior official T Gnanasekar said that silver has been lagging but could bounce back quite sharply. "Anywhere near $1313.76 could be a good level to buy MCX September silver for a possible target of $1338.04, though forecasting prices can be tricky, especially for a commodity such as silver.''

For many investors, there has been a fundamental shift with many perceiving silver as more affordable than its costlier cousin gold. Though both the precious metals climbed in Mumbai on buying by stockists and investors, gold gained $3.31 to $579.59 per 10 gram, while silver added $24.28 to $1,329.21 per kilo.

Traders said buying by local jewelers for the coming marriage season also supported the uptrend in Silver Prices.

"Silver happens to be the most happening commodity these days. The unprecedented surge in Silver Prices and a 30% sudden crash slightly dampened demand. But investors are back, and in India the demand for silver jewelry is rising rapidly,'' said Gnanasekar.

Export data from the Gems and Jewellery Export Promotion Council, shows that silver jewelry export from the country has zoomed by a robust 34% for the month of April. The provisional export of silver jewelry for the period April 2011 at $40.33 million showed a growth of 34.57% over the comparative figure of $29.97 million for April 2010.

Meanwhile, the provisional export of gold jeweler and gold medallions for the period of April 2011 at $1,023.96 million showed a decline of 0.43% over the comparative figure of $1,028.38 million for April 2010.

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