India Buys Silver

October 11, 2013 at 09:46

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India is the largest importer of gold and silver in the world. The government recently tried to tighten its hold on gold by boosting taxes and restricting gold imports, which led to increased smuggling of the precious metal, among other things.

But now, as the festival season approaches, Indians need legitimate access to precious metals. And analysts are expecting silver purchases to increase.

Indians view precious metals, particularly gold and silver, in high regard. In India, precious metals serve not only as an investment, but also as a valuable gift. The wedding and festival season in approaching now, so this is a popular time to buy gold and silver to offer to the married couple.

Lately, though, many Indians are starting to buy silver more than gold. One reason for this is the price of gold, which is usually about 60 times more expensive than silver. But the government has also increased the duty on gold three times this year to 10 percent. Due to these increases, the country has decreased the number of tonnes it’s importing.

You may be wondering why the government would do this with such success in the gold market. The government’s goal is to narrow the nation’s account deficits, which has already decreased to $6.7 billion bringing its lowest amount in 30 months. Importing gold directs money toward foreign entities and away from domestic spending.

Instead of gold, India has started importing a record high amount of silver. From January to August, it imported 4,073 tonnes of silver – twice as much as it did during the entire year in 2012. The record high in 2008 was 5,048 tonnes, according to Reuters, but that was for the entire year, so it’s likely 2013 will surpass this number.

The government is setting people up to buy silver over gold. According to Nikos Kavalis from Metals Focus Ltd., India imported $1.78 billion worth of silver during Q2. This is a significant increase of 311% compared to last year’s second quarter.

With more silver available at a decent price, it will be more attractive to people in rural areas as well. Silver will be taking over jewelry cases, and at the lower price, people will be drawn to it.

And when demand increases, so will prices.