In less than a month, silver has risen 20.2% on the MCX polled spot price.
By Rajesh Bhayani
With world economies going through a tough phase and equity markets looking uncertain, a lot of money is flowing into gold and silver. No wonder, prices of both these precious metals are on the boil for quite some time now.
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Silver, at Rs 74,164 per kg, is just 1.3% away from its all-time high of Rs 75,000 reported in April 2011. However, the rise in prices, as it happens with silver usually is very sharp, making industry watchers a little nervous.
In less than a month, silver has risen 20.2% on the MCX polled spot price. On March 9, silver closed at Rs 61,599 per kg, and within weeks, on April 6, prices shot up to Rs 74,098 per kg. This fast rise in price has hit demand and imports have fallen as well.
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The rise has been so fast that market observers see high volatility ahead and advise that the time is to remain watchful. More interestingly, at these high prices, sales of old silver jewellery and utensils are increasing in Mumbai’s Zaveri Bazar, say industry players. “Many households don’t want to forgo this opportunity to encash old silver,” said Viraj Didwania, founder-director of Foresight Bullion India, one of India’s top-five silver trading companies.
According to him, retailers of precious metals have seen a sharp fall in demand, and even footfalls have fallen by 40-50%.“Buying is only need based,” he said, adding that while prices are on the boil now, going forward, there could be a downward trend in the next few years. He expects silver prices to move in the range of Rs 75,000 to Rs 40,000 per kg in the next few years.
However, many analysts continue to be bullish on the white metal as indicated by local futures market players. Anuj Gupta of IIFL Securities said the trend in silver is looking positive. “On the technical chart, it is forming higher-top, higher-bottom formation and open interest has increased significantly in tandem with prices. On the fundamental side, too, the safe haven demand is likely to continue,” said Gupta.
When silver prices were at Rs 66,200 levels in March, the open interest was 11,608 contracts. Now, when it is around Rs 75,000 in the futures market, the open interest is 16,159 contracts. “While silver prices increased by 13.5%, the open interest has increased by 39%. Clearly, as per the open interest data, there is a huge build-up in the counter which indicates the bullish trend,” added Gupta.
The year 2022 was a very good one for silver and the demand for the whole year is estimated at 10,000 tonne, while 9,450 tonne was imported – a record high in India. However, in the January-March quarter, silver imports fell sharply.
In 2011, global prices went up to $49 cent per ounce while price in India rose to Rs 75,000. However, both the prices crashed soon.
