India silver imports may top 5,000 tons in 2012

February 23, 2012 at 12:33

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India’s silver imports may top 5,000 metric tons in 2012 due to strong investment demand, Prithviraj Kothari, the president of the Bombay Bullion Association, said Tuesday.

The country imported around 4,800 tons of silver last year, he said.

“Silver demand is expected to rise on firm industrial and investment demand,” he told reporters on the sidelines of a conference.

Though demand for silver may not pick up in the next few weeks as returns from debt instruments are better than that from silver, investment interest in the white metal is expected to grow as and when the country’s central bank starts lowering lending rates, Mr. Kothari said.

Such a move is expected to boost an economic recovery and, in turn, silver usage as the precious metal finds as much application in industrial goods as in jewelry, coins and artefacts.
Consumer interest in the precious metal is lukewarm because the current price of around 56,000 rupees ($1,140.5)/kilogram is seen as high.

“Demand from ordinary consumers will only improve if the price of the metal falls to 48,000 rupees-52,000 rupees/kg,” Mr. Kothari said.

Separately, he said local gold prices are likely to trade in a 26,000 rupees-35,000 rupees/10 gram range in 2012 because of the yellow metal’s safe haven appeal.

“The ongoing debt crisis in Europe and the Iran issue are likely to keep gold prices firm,” he said.

Traditionally, investors prefer to lock away more of their wealth in gold during times of uncertainty.

Mr. Kothari also said that investment interest in Gold Exchange Traded Funds will continue to grow in the world’s largest gold consumer, though the volumes will be dominated by physical gold sales for years.

“Still, there is some shift from jewelry demand to the exchange traded funds due to better returns,” he said at the launch of a new gold ETF by the Motilal Oswal Asset Management Co.

As many as 13 gold ETFs have been launched over the past five years in India as suave urban investors are realising that it is a better investment instrument than jewelry.

Gold has given higher returns than any other asset in a year, although the price rise has begun to taper off in the past few days. At the end of January, gold prices had jumped 40% from a year earlier while the Bombay Stock Exchange’s benchmark 30-share Sensex had fallen 6% during the same period.