Silver surges to record high

Silver prices hit a record high of Rs 46,710 a kg on Wednesday in Mumbai’s Zaveri Bazar, while quoting at Rs 46,200 in the national capital region.

Funds and individuals are betting big on silver, as the metal has offered a phenomenal 81 per cent return so far this year. Silver was quoted at $30.50 an ounce on Wednesday compared to $16.88 in the beginning of the calendar year 2010.

Gold offered 28 per cent returns in the same period. The yellow metal rose to $1,405.20 an ounce on Wednesday from $1,096.95 early this year.

Despite high prices, global players were optimistic about silver, as the metal was being booked as the replacement of gold, said Suresh Hundia, member of the Bombay Bullion Association.

Traders believe silver can rise further on brisk buying, while gold may see a correction.

Silver had been supported by concerns over the financial health of the euro zone. The US Mint’s data showed its American Eagle silver coins sales set a record above four million ounces last month, as European sovereign debt crisis and economic uncertainty prompted investors to bet on silver and gold as safe haven assets, according to a research report by Religare Commodities, a commodity broking firm.

Morever, inflows in the exchange-traded funds (ETF) have also risen sharply last month, with global holdings growing five per cent to record highs. Growing industrial activity and a recovery in the global economy, particularly in China, are also helping the white metal.

Some weakness was seen early November, as the dollar rose to two-month high against the euro, paving way for sharp correction in silver prices. But, traders accumulated the white metal at lower levels.

Silver had touched a record high of Rs 45,735 a kg early December on the Multi Commodity Exchange (MCX), but, thereafter, consolidated in a range of Rs 43,000-45,000 a kg for the rest of the month.

The metal has seen a sharp upmove since August, but signs of lethargy are beginning to show in the market. The daily charts are showing divergence from momentum indicators, which is a bearish indication. While it’s too early to call for a trend reversal, as the weekly charts still hold firm, $30-31 an ounce should remain the testing range for bulls to breach in January. However, price may move between Rs 46,000 and Rs 48,000 a kg on MCX.

A research report by Angel Broking forecast silver price to see resistance first at Rs 49,090 a kg, and then at Rs 53,830 a kg.