India's silver imports set to slide

Silver imports into India are expected to be marginally lower in 2011 than last year's 3030 tonnes, despite the drop in silver prices

Author: Shivom Seth
Posted: Monday , 28 Nov 2011

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MUMBAI -

Silver is not generating any interest from buyers in India at the moment, despite the small fall in price. In Mumbai, it fell 3.88% on Saturday to settle at $1,063.39 a kilo as compared to $1,106.34 two weeks ago. On Monday, silver was down further in early trade, quoting at $1,010.99.

Traders insist that investors and consumers will only reappear in the market if the price falls below a certain benchmark price in India.

People will not buy at the current high price. In dollar terms, silver has dropped 9.50% to close at $31.81 an oz, as compared to $34.54 two weeks ago. The rupee has also fallen 3.14% to settle at 52.26 a dollar on Saturday, as compared to 50.67 on November 15. This has ensured that most investors will keep away from silver for the time being,'' said Sonamull Shan, bullion trader in Mumbai.

An analyst with a brokerage firm here said silver prices overseas have declined 37.7% since the peak witnessed in April of over $49.51, as against gold's 13% gains. Though this would be the ideal time to shore up on silver, since it makes the white metal a good long term investment, consumers are keeping away.

India is the largest consumer and importer of silver in the world. According to commodities brokerage firm, Karvy Comtrade, silver imports by India soared more than six times to $1.7 billion in the first half of 2010. However, a new report by ScotiaMocatta has noted that silver imports into India are expected to be marginally lower in 2011 from last year's 3,030 tonnes.

"Most traders and silversmiths across India have refrained from buying silver when prices jumped above Rs 50,000 ($961.97) per kilogram, which is a benchmark in most cities here,'' said Shah.

India is the largest importer of the silver in the world and the country consumes more than 4000 tonnes of silver annually with the bulk of sales being made in rural areas. India has emerged as the third largest industrial user of silver in the world after US and Japan.

However, some analysts have said that the high import growth of gold and silver by 64% at $33.3 billion and the plunging export growth to 24-month low has also ensured that trade deficit widens to hover around $150 billion in India.

"Though high imports of the precious metal was due to asset switching, imports in the month of October of $4 to $5 billion of gold and silver is rather normal because of large gems and jewellery exports which take place around the same time. Huge imports of gold and silver at $7.2 billion account for 40% growth in October 2011, but this month silver imports are considerably lower,'' said an analyst with a foreign investment brokerage here.

Most bullion houses would have already brought in their store of silver to be used in their jewellery exports by this time, which could also result in the fall in demand.

India's combined imports of gold and silver rose 40% in October to $7.2 billion from a year ago. Traders said the latest steep drop in the silver price from nearly $50 per ounce has generated more demand for the white metal among Western investors, but not particularly from those in I