By: Biman Mukherji
NEW DELHI — Higher returns are tempting many small Indian investors to buy silver and sell some of their gold jewelry as the price of the white metal has more than doubled over the past year, traders said.
Spot silver prices rose to an all-time high of 60,125 rupees ($1364) a kilogram Friday in India’s main bullion hub, Mumbai, from 28,535 rupees on April 12 last year, driven by firm global cues as concerns over unrest in the Middle East and North Africa have improved its safe-haven appeal. Gold prices too rose, but at a much slower pace of about 21% to 21,500 rupees per 10 grams.
“Ordinary investors are buying silver as if there is no tomorrow,” Suresh Hundia, president emeritus of the Bombay Bullion Association, told Dow Jones Newswires. “Many people are selling their gold and buying silver because gold has not given them as good a return.”
According to him, Mumbai alone is recording daily silver purchases of 400-500 kilograms.
Typically, most Indians prefer buying gold rather than silver for investment. The change in trend may hit gold demand to some extent this year in the world’s largest consumer where 700-800 tons of the yellow metal is bought annually.
Mr. Hundia said the higher demand hasn’t driven up silver imports.
“Most of the supplies are coming from recycled silver from wholesalers, who want to make a quick buck,” he said, adding that monthly imports of silver were more or less static at around 30-50 tons.
The investment demand for the white metal is so high that there is a shortage of silver in the key western Indian bullion hub of Ahmedabad, said Girish Choksi, a bullion dealer based in the city.
At the same time, demand for gold is steady to lower.
Demand for gold in southern states such as Tamil Nadu and Kerala has crashed in the past 10-15 days due to a combination of high prices as well as ongoing state elections, which have made it difficult for people to carry cash for purchases because of law and order problems, said Krishna Kumar Nathani, managing director of Indiabullion.com.
“Elections have overshadowed gold demand for marriages… That demand will now come around June,” he said.
Mr. Nathani said he expected a 10%-15% price correction in silver in May-June, but investors shouldn’t panic because returns will still outshine that from gold over a period of a year or so.
“It has already beaten gold in the past one year and it will continue to do so because the scope for price growth is still more in silver.”
