Indian consumers eye silver in face of pricey gold

MUMBAI: India, the world's No. 1 silver buyer, is on track to show sharply higher imports this year of the metal near 30-year peaks, as consumers normally fond of more expensive gold seek to lower cash outlays.

"Certainly there has been an increased interest in silver, and it's drawing interest from people who cannot afford gold, even return-wise the metal has done well," said Haresh Acharya, head of the bullion desk at Ahmedabad-based gold wholesaler Parker Agrochem .

India's silver demand averages 2,500 tonnes per year and the country, which produces around 7.3 million ounces a year (206.95 tonnes) according to the Silver Institute, could import 20 percent more this year or 1,200 tonnes, the Bombay Bullion Association (BBA) says.

Around 50 percent of imports come from China while recycling makes up some of the supply of the metal. Silver is used in jewellery, coins and bars for investors, while industry uses the metal for products from light switches to cars.

Silver prices globally and domestically are currently running near record highs -- partly hauled up by gains in gold, but the poorer cousin is performing more brilliantly.

"Compared with gold, the price of silver still has a long way to go," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

Spot silver traded just under $29 an ounce on Friday, just off 30-year highs above $30, while gold was at $1,391 per ounce, off a record high above $1,430 hit this month.

Domestic silver prices on India's Multi Commodity Exchange are currently close to records at 43,899 rupees per kilo and the metal is offering better returns than gold.

"There is demand for silver as the sentiment in the market is that prices may go to 50,000 rupees or 60,000 rupees now," said Shekar Jog, partner at Sangli-based V.S. Bullion.

The BBA's president, Prithviraj Kothari, also thinks silver on the domestic market could hit the 50,000 rupees mark by the end of this year and industry players say it can still outpace gold.

Indian appetite for silver is coming partly from rural buyers as a normal monsoon in 2010 has boosted crop production with a consequent benefit to incomes, after last year's severe drought shrivelled spending by farmers.

Indians traditionally invest in gold and silver jewellery, especially during the busy festival season towards the end of the calendar year, and for weddings.

Jewellers and wholesalers said interest for silver was on the increase, especially given its returns and cheaper initial cost.

"The most important benefit for consumers is it's much more affordable than gold," said Babu Alapatt, managing director at retailer, Alapatt Gold Pvt Ltd , which also sells silver.

Some retailers are seeing more interest from buyers in silver bars or coins than jewellery, however.

"They prefer buying coins and bars than buying silver jewellery," said Shekar Jog, partner at Sangli-based V.S. Bullion.

HDFC Bank, which introduced silver coins for sale earlier this year, said interest had risen.

"In May this year when we started selling silver coins for the first time, we became the first bank in India to do so. We are extremely pleased with the progress so far. Today, we are selling silver coins through almost five times the number of branches than when we started," an HDFC Bank spokesperson said.

The article actually said 43,899 rupees per ounce of silver, but that is clearly incorrect. Kitco lists the closing price for silver at 1290.03 rupees. Evidently, the translator of this article guessed at the meaning of the Hindi term used.

Thanks for the correction. I’d bet that he wrote “per ounce” rather than “per kilogram” out of habit. We sure don’t talk about buying silver by the kilogram here in the U.S.

the metal is offering better returns than gold

Silver vs gold (via the ETFs SLV and GLD) over the past three months shows an absolutely spectacular gain:

I remember an artistic individual with more money than sense, who lived with a bunch of artists. The lot of them consumed so much beer, that he got the idea to use a kiln to melt the cans down into slabs. But, to be artistic about it, he decided to make thick aluminum Penrose tiles.

After some year of melting down beer cans and other waste aluminum, he ended up with a lot of tiles, and needing some room, decided to replace his gravel driveway with an all aluminum driveway, paved over.

More than anything else, he imagined how amusing it would be, many years after he had passed away, when the new owners of his property wanted to repair the driveway.

It’s fun to think about when thinking about saving up precious metal for a rainy day.

The bubble isn’t in silver or gold. Our bubble is printing dollars faster than Kimberly Clark makes toilet paper. The US currency is due to a melt down which will make the current recession seem not so bad when the dollar crashes. Prudent people in India and everywhere are moving cash to hard assets, including silver and gold.

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