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Silver sales set to outshine gold in India

Investors in India are bullish on silver, saying the white metal is in position for a potentially spectacular move over the next year and more.

Indian retailers are bullish on silver. With supplies tightening, deliveries are slowing down this week in the bullion market in Mumbai. What has also buoyed sentiment is that silver continues to lead precious metals, and sales have jumped over 24% this year.

Snapping a two day losing trend, both the major precious metals, gold and silver, bounced back in the Mumbai market on buying by retailers at existing low levels. While gold rebounded to $575 (Rs 31,205) per 10 grams (US$1788/oz), silver gained by 1.38% to $1,159.49 (Rs 62,930) per kilo ($36.06/oz).

“Strong support is expected in the Silver March contract around $1,159 (Rs 62,900) ($36.05) from the start of the week,” said analysts tracking the white metal. Traders have been taking long position in the Silver March contract above $1,161.49 (Rs 63,050) ($36.13) for target near $1,178.88 (Rs 64,000) ($36.67) for this week, they added.

Silver prices have remained steady at around $32 since mid-May. “Though everybody has been gushing about the returns that gold has given over the past four years, it is the white metal that has streaked ahead,” said Manjusha Madani, bullion analyst at an investment house. 

She added that silver prices have jumped from $304.39 (Rs 16,525) per kilo ($9.47/oz) in 2008 to $1,381.95 (Rs 75,020) per kilo ($42.98) in 2011, a gain of 354%. Though prices have dropped per kilo, it does not mean that the potential in silver is exhausted, she added.

An analyst report had also shown how silver had risen about 53% from December 2008 through March 2010, twice as much as gold. Silver is expected to keep beating gold. 

“More and more people are realising the value of investing in silver coins and bullion bars in India,” added Jayeshbhai Shah, a bullion retailer at Mumbai’s Zaveri Bazaar. “The value of silver has increased rather steadily for the last few years. People who have never invested before are now investing in silver, because they know that buying silver is a great way to ensure that their money is there when they need it,” he added.

SILVER JEWELLERY 

“The white metal is now turning out to be the preferred choice for everyday wear, with exquisite silver jewellery on offer, because gold is too expensive. Besides being trendy and contemporary, the metal readily blends with a variety of clothing and other accessories, thereby offering a suite of options to the wearer,” said an official at Dhanabhai Export House. 

He added that more and more consumers were looking for traditional or contemporary silver jewellery and were even looking at the white metal for classic business gifts, to be given during the festive season. 

“There are customers who comes to us asking us for heritage art, or even our temple jewellery selection, which is only made in silver. We take great pride in preserving our heritage craft and have several jewellery items that are exact replicas of antique temple jewellery,” he added.

During 2011-12, silver jewellery exports grew to 44% as compared with gold jewellery exports of 30%. India is the biggest consumer of white metal jewellery, and has also found a new class of buyers in the West. 

Ketan Shroff, managing director of Pushpak Bullions said investors and jewellery-lovers prefer silver jewellery these days, as gold prices are going up constantly. Silver prices are expected to rise further, if one takes into account the demand potential.

GOLD HIGH

Retailers pointed out that the recent drop in gold prices has sparked off reasonable buying interest in both gold and silver from stockists and retail consumers across the country, given the long wedding season. The yellow metal had plunged to a one month low last Thursday, leading to frenzied buying.

However, analysts added, that after gaining around 16% this year, gold prices are unlikely to cross the $589.44 (Rs 32,000)/10g ($1833) mark in the near term, given the year end profit booking activities. This allows investors to take a better look at silver, in the near term, they added.

Meanwhile, data by GFMS, a Thomson Reuters unit, indicates that the silver markets are in for a surplus. The 2012 surplus is estimated at around 3,000 tonnes even as 2013 surplus is pegged at about 4,000 tonnes, but, of course this doesn’t take investment demand into account (see Silver surplus – what silver surplus?).

Gold and silver prices generally rise when sentiments on the economy and the financial markets are bearish or there is uncertainty over future trends. Retailers point out that silver has also gained from investment demand in the country. There has also been an increase in demand for silver jewellery, due to the fact that gold is becoming out of reach for many.

 
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