Silver hits 17-month low in international market

A one-fourth fall in the rupee value makes the white metal 27% costlier in India

Silver is currently trading at around 17-month low in the international market. But, the white metal is holding high in India due to a record depreciation in the rupee against the dollar, thereby, forcing customers to postpone fresh purchases. Consequently, silver demand has declined between 30-40 per cent in the physical market.

In dollar terms, silver prices declined on reduced offtake by industrial units due to overall depressing sentiment from the manufacturing sector across the world. The metal was quoted at $26.90 an oz on Friday after hitting the low of $26.60 an oz earlier in the day on hectic speculative selling in the absence of industrial demand, as silver continued its losing spree for the third straight day. Heavy profit booking by stockists and investors also helped the metal slid in the world market, where precious metals posted their biggest-ever single day drop on Thursday.

In India’s most popular bullion market in Mumbai’s Zaveri Bazaar, however, silver held highs on the rupee’s drastic decline. Silver price in the same period of 17 months shot up 27.39 per cent due to 25.05 per cent decline in the Indian currency against the dollar. While silver price closed on Friday at Rs 53,720 a kg from the level of Rs 42,170 a kg on January 25, 2011, the rupee closed with a record slump at 57.16 on Friday, compared with 45.71 a year ago.

“Silver demand has waned in India due to a fall in industrial activities. Barring a low quantity purchase from utensil and coin manufacturers, who are building stocks to meet post-monsoon demand, no buying activity takes place. Other traders and stockists are deferring their purchase plans amid expectations that a marginal recovery in the rupee would bring silver price down,” said Suresh Hundia, a leading bullion dealer based in Mumbai.

Around 66 per cent of the world silver production is consumed for industrial uses. Since the global industrial activities are facing a slowdown due to the Euro zone economic crisis and fluctuating job data from the US, the overall market sentiment has turned negative.

“Overall market condition is unfavourable with opaque long-term economic situations. However, silver price in India is determined by the movement in Indian currency. A drastic decline in the rupee, as witnessed in the past, would nullify the global price fall. Hence, the development in the global market cannot determine silver demand in India. Currently, the Indian demand is down because of the lack of wedding season and the arrival of the monsoon rainfall,” said Rahul Mehta, managing director of Silver Emporium, a city-based leading artifact manufacturer.

Silver demand in India during the May-July season would normally remain low. This year, however, the demand of the metal has declined between 30-40 per cent during the season, owing to the change in business scale.

Customers are currently delaying fresh orders in anticipation of further price fall. However, silver demand is set to recover from August onwards, when stockists and bulk consumers would start re-stocking for their preparations for Diwali and Christmas seasons, Mehta added.

In the last 17 months, silver prices hit the highest of Rs 75,020 on April 24 in rupee terms and $48.44 an oz on April 28 last year.