Silver Prices May Swing Back–But Depends on China, India, ETF Demand

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The price of silver in Indian and international markets may be depressed at the present moment, but analysts here have predicted a steady climb from this low for the rest of 2013.

Much of the price rise depends on the way India and China move on this metal front.

Last year and the first half of 2013 have been particularly bad for Indian silver. In 2012, demand for silver in India had slumped 80 percent (based on import figures of the white metal). India, incidentally, is totally dependent on imports to meet its domestic demand for silver.

The investment appetite for the precious metal in India has almost dried up, something that was unthinkable just a couple of years ago.

today's metal prices - MetalMiner IndXThe year 2013 has not brought any cheer for silver. Internationally, in over six sessions in early May, the price of this white metal dropped 33 percent from a record of US $49.51 an ounce set on April 28, 2013. What has also kept investors away in India is also the “high” Customs duty at 6 percent.

According to a Reuters report, silver prices have held at more than US $32 since mid-May, and analysts expect silver to move higher in the second half of the year. The reasons? Inflation concerns in China and India, low interest rates in the US, and of course, the sovereign debt crisis in the Eurozone.

In fact, the international markets will be watching the Indian silver market closely in the remaining months of 2013, since some silver analysts have a few weeks ago predicted that there would be a pickup in demand from India, one of the largest silver consumers in terms of fabrication demand.

In India, besides its high industrial use, silver has also often been seen as an alternate to gold where investment in precious metals is concerned. Analysts here say that when gold prices will start rebounding from the current lows, silver will then turn lucrative. Also, silver is often seen as a “safe” metal to hedge against economic uncertainty.

What is also expected to further prop up the silver prices in India is the rising demand from financial investors for exchange-traded funds (ETF).

In Asia, particularly India, investors still do prefer investing in the physical form of the metal, but with silver ETFs, a relatively new phenomenon compared to gold ETFs, there will be a new spate in silver investments here, and this, too, say analysts, is likely to bolster silver prices.

Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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