Silver prospects
Till now India was known in the bullion market as the biggest buyer of gold and it can control the global gold prices. However, in the recent past India has acquired a new role in silver market also.
India is now becoming recognized for its strong role in the silver market. Rising gold prices are good for silver in India as would-be purchasers of gold jewellery and bullion turn to the white metal as a cheaper alternative during the festival and wedding season.
Precious metals are the primary savings instrument of India’s rural population. Interestingly, this connection with the rural population makes the weather and agricultural harvests significant factors in India’s silver market.
A good monsoon season, like that experienced this year, leads to a better harvest and more money for silver jewellery and bullion purchases. The return of the Indian silver buyer could be having a significant impact in the bullion market.
Silver prices moved higher on demand last week even as most other commodities prices trended lower as more and more Indians bought silver jewellery during the festival season in the country.
Soon after briefly touching a nearly 30-month high of $20.04 an ounce early in the trading session on Tuesday, silver had dipped to $19.68. The white metal managed to make a bid back up to its earlier highs, scratching $19.90 before falling back down to a close of $19.82 an ounce on the COMEX.
Profit-taking and outside market factors such as a stronger dollar, lower oil prices, and weak equity markets were responsible for the selling pressure. News out of China concerning slower factory output in the second half of 2010 didn’t help industrial silver either.
Throughout July and most of August, silver has remained range-bound between $17.50 and $18.50 an ounce. True to tradition, the white metal began to rally the last week of August closing in on $20 an ounce.
The sometimes precious, sometimes industrial metal is playing both sides as demand for safe haven assets continues alongside renewed hopes of economic recovery, no matter how slight.
As usual, silver has followed gold’s lead while at the same time outperforming its yellow cousin.
Many analysts believe both demand from investors and industrial uses has helped to bolster silver prices this year, which have increased by 18 percent, compared to gold’s 14 percent, since the start of 2010. Industrial demand has especially bounced back from last year when companies slashed purchases in the midst of the economic downturn. Silver demand from the electrical industry has ballooned by nearly 25 percent in the past year alone.
Despite indications silver’s fundamentals are strong, there are some concerns over the role of speculative investment in pushing prices up. Last week, the COMEX experienced the highest number of speculative bets on higher silver prices since last December.
While industrial demand does seem to be recovering from 2009 levels in some parts of the world, there are worries that a double-dip recession could send industrial demand plunging again. If too much of the gains in the silver price are based on speculative betting, there is real danger of a sharp downward correction in prices.
Silver should do well throughout September, and most silver analysts are confident the metal will soon reach the $21 an ounce highs last seen in March 2008.
India is now becoming recognized for its strong role in the silver market. Rising gold prices are good for silver in India as would-be purchasers of gold jewellery and bullion turn to the white metal as a cheaper alternative during the festival and wedding season.
Precious metals are the primary savings instrument of India’s rural population. Interestingly, this connection with the rural population makes the weather and agricultural harvests significant factors in India’s silver market.
A good monsoon season, like that experienced this year, leads to a better harvest and more money for silver jewellery and bullion purchases. The return of the Indian silver buyer could be having a significant impact in the bullion market.
Silver prices moved higher on demand last week even as most other commodities prices trended lower as more and more Indians bought silver jewellery during the festival season in the country.
Soon after briefly touching a nearly 30-month high of $20.04 an ounce early in the trading session on Tuesday, silver had dipped to $19.68. The white metal managed to make a bid back up to its earlier highs, scratching $19.90 before falling back down to a close of $19.82 an ounce on the COMEX.
Profit-taking and outside market factors such as a stronger dollar, lower oil prices, and weak equity markets were responsible for the selling pressure. News out of China concerning slower factory output in the second half of 2010 didn’t help industrial silver either.
Throughout July and most of August, silver has remained range-bound between $17.50 and $18.50 an ounce. True to tradition, the white metal began to rally the last week of August closing in on $20 an ounce.
The sometimes precious, sometimes industrial metal is playing both sides as demand for safe haven assets continues alongside renewed hopes of economic recovery, no matter how slight.
As usual, silver has followed gold’s lead while at the same time outperforming its yellow cousin.
Many analysts believe both demand from investors and industrial uses has helped to bolster silver prices this year, which have increased by 18 percent, compared to gold’s 14 percent, since the start of 2010. Industrial demand has especially bounced back from last year when companies slashed purchases in the midst of the economic downturn. Silver demand from the electrical industry has ballooned by nearly 25 percent in the past year alone.
Despite indications silver’s fundamentals are strong, there are some concerns over the role of speculative investment in pushing prices up. Last week, the COMEX experienced the highest number of speculative bets on higher silver prices since last December.
While industrial demand does seem to be recovering from 2009 levels in some parts of the world, there are worries that a double-dip recession could send industrial demand plunging again. If too much of the gains in the silver price are based on speculative betting, there is real danger of a sharp downward correction in prices.
Silver should do well throughout September, and most silver analysts are confident the metal will soon reach the $21 an ounce highs last seen in March 2008.
-Umesh Shanmugam
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