Silver puts gold in the shade
Both gold and silver are having a bull run in India, but silver is definitely having the better run of late and seems to be becoming the preferred alternative to gold for many investors
Posted: Tuesday , 05 Apr 2011
Precious metals are on a roll in India. Gudi Padwa or Ugadi is the beginning of the new year for the people of Maharashtra, Andhra Pradesh and parts of Karnataka. On Monday, April 4, many Indians celebrating the festival, thronged to jewellery outlets and bought silver coins as token icons.
``It is one of the most auspicious days in the year when people start new investments. And for an Indian consumer, a gold coin is mandatory and a traditional offering. But the high price has daunted many. Silver was the most preferred alternative,'' said Manish Kedia of bullion retail outlet in Mumbai, Dhanabhai Jewellers.
Silver has risen at more than twice the rate of gold last year and has come close to gold, narrowing the gold-silver ratio gap. The ratio, which was around 70 in June last year, has practically been halved, maintain analysts.
There are also several new instruments that are being offered in the markets, not just for paper instruments like ETFs, but also for ornaments.
On the occasion of Gudi Padwa - one of the three-and-a-half auspicious mahurats of the Hindu calendar - many jewellers have cut down their making charges, which has ensured good sales. In India, jewellers add on a making charge to the gold or silver ornament, which is over and above the rate of the bullion.
``Since we know there will be a customary rush to purchase gold and silver and certain other small ornaments, we have subtracted our making charge completely. We also have various other schemes on offer. All these schemes, and the fact that it is close to the wedding season, has revved up sales by around 25%,'' said Toranmal Choksi of retail outlet Shah & Co.
The fact that silver had crossed $1,317 per kg did not dampen consumer appetite. Jewellers said the outlook on both the metals has been bullish for some time now. ``Rates are no longer a deterrent for the purchase of these metals. Both gold and silver are perceived as safe and consistent performers,'' said Mumbai city-based jeweller Saurabh Gadgil.
He added that since the wedding season was around the corner, customers made a beeline for chains and traditional jewellery pieces. Similarly, the demand for gift articles in silver was also high.
Jewellers added that silver has risen higher relative to both other precious metals and other commodities than any other asset class.
Rajan Venkatesh, managing director of ScotiaMocatta, a division of Scotiabank, the largest seller of precious metals among banks in India said that there was still a lot of interest in silver. He added that gold would also rise, but it may not see the same upside as silver.