Buyers shift to silver as gold rises

Traders to bet big on silver as correction in yellow metal is imminent.

As gold prices become costlier, and riskier at these very high levels, market players fear an imminent correction in it. This has tempted speculators and physical traders to bet big on silver.

At Zaveri Bazar here, bullion traders and makers of ornaments and artifacts have started booking silver to their capacity, pushing it to a premium of Rs 1,000-2,000 per kg on its cost of import. In Mumbai on Friday, gold was up by Rs 960 per 10g to Rs 27,750, while silver went up Rs 2,255 to Rs 63,800 per kg.

“The reason is obvious,” said Lalit Jagawat, proprietor of Nakoda Bullion, a leading bullion dealer. “Gold holds no potential for further return. Any correction in price would fetch losses to us, as the metal has already become unaffordable after setting a new high every alternate day for the past few months. Silver, comparatively, is under-bought. Hence, bullion traders are now mad towards silver.”

Gold hit the all-time high of Rs 27,950 per 10g in early afternoon trade here. Profit booking pulled it a little down to close the day at Rs 27,750 per 10g. In rupee and dollar terms, gold has risen 34.3 per cent and 31.4 per cent, respectively, since April 1, especially because of the sovereign debt crisis in the European Union and mounting concern that the US economy may slip back into recession. Gold hit its upward circuit of five per cent on MCX after the New York session opened on Friday.

In London, spot gold rallied to a new record at $1,877 an oz, as investors sought refuge from a second day of hefty losses on the stock markets. US gold futures rallied by two per cent to a record of $1,880 an oz, as investors again sought refuge from economic jitters in the precious metal. Profit booking at this level pulled the price down to trade around $1,845 an oz.

According to Anand James, chief analyst of Geojit Comtrade, gold’s safe haven appeal continues to attract inventors, pushing gold prices to a new peak. Gold priced in euros touched an all-time high on persistent worries regarding euro zone debt and US economic slowdown.

Silver remained resilient, offering a 11.45 per cent price rise since April 1. Spot silver was trading in London at $42.14 an oz. In Mumbai, as mentioned earlier, silver closed at Rs 63,800 a kg, a rise of Rs 2,255 from yesterday.

This festive season will see more demand for silver products, including coins and bars, as bullion traders are keen on products which can offer high returns. Traders expect silver to hit Rs 73,000 a kg soon, said Jagawat. Bullion dealers have deferred fresh purchase of gold indefinitely, amidst the expectation on price correction.

“Generally, festive demand for gold begins a week before Raksha Bandhan (August 13). This year, no such demand has been witnessed so far, due to the exorbitant price rise,” said Rahul Mehta, managing director of Silver Emporium, a leading silver artifact producer and retailer in Mumbai.

Silver Emporium plans to invest Rs 50-crore to set up four big-format stores in South India to expand its retail segment. In view of the increasing demand, the company is doubling its capacity of designer silver articles.