Silver price surges, imports halt

Market quoting at a huge discount as price crosses Rs 45,000 in India

Silver has again started rising, with prices outperforming gold after reports from major European economies on possible introduction of quantitative easing.

Here, silver crossed Rs 45,000 a kg, the highest level after July 21, 2014, and closed 3.7 per cent or Rs 1,600 a kg higher than Thursday, at Rs 45,080 a kg. Standard gold closed Rs 185 higher at Rs 30,745 per 10 g.

However, with prices rising sharply in precious metals, silver is quoted at a 20-40 cents an ounce discount to the cost of import, this high a level after three years. Gold was quoted at a $37.5 an oz or Rs 900 per 10g discount to the cost of import.

At the high price, silver imports have almost stopped, as several traders now have large stocks, imported earlier at a lower price. In 2015, imports were a record high of 7,908 tonnes. The earlier imports are being sold at a discount to the market price -- this is Rs 800 a kg in the Ahmedabad market, a major centre, and half this in Delhi.

Chirag Thakker, director of the Ahmedabad-based Amrapali group, said: “No fresh imports will happen for now. It seems the bullish trend abroad started at the same time the demand in the Indian market has fallen drastically on the jewellery side, as well as the investment side in the physical sector.”

On Friday in the international market, silver crossed $19 an oz, considered a major technical resistance. If it closes above that, another bull run is expected. In early trade silver was above $19.39, which retracted later.

Explaining the sharp rise in silver prices, T Gnanasekar, director, Commtrendz Research, said: “Silver has outperformed gold in the past few days, due to it being relatively undervalued. Also, silver tends to catch up with gains in gold with a lag, as costlier gold will force market participants to look for an alternative, which is silver.”

The gold to silver ratio was above 80 only a few months before; it is now quoted below 70; so, silver has risen faster than gold. The ratio indicates with one ounce of gold how many ounces of silver can be purchased.

At the current price, the import duty fixed on silver per kg by the government is Rs 4,163; a few months earlier, it was Rs 3,700.