by Michael Maharrey, Activist Post:
Indian silver demand has spiked, driving the price to record levels in rupee terms.
There is a perception that silver has lagged gold despite a price increase of around 35 percent on the year in dollar terms. The fact that silver remains well below its record high, even as gold has set multiple records in recent months, drives this feeling.
But if you look at the trajectory of silver from an Indian perspective, it doesn’t seem like such a laggard.
On Oct. 23, silver briefly eclipsed the ₹100,000 per ounce level before settling around a record high of around ₹97,000.
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Notably, this rally occurred after the Indian government cut taxes on gold and silver imports by more than half, lowering duties from 15 percent to 6 percent.
According to Metals Focus, the market responded favorably to both the import duty cut and its timing right before the festive wedding season.
Silverware sales seemed to benefit the most.
“Our discussions with the trade suggested that silverware demand was subdued beforehand, given that these articles are mainly used for gifting and so high prices acted as a deterrent. However, the price correction, post-duty-cut, saw this area of Indian silver demand return quite significantly.”
Improving rural consumption also boosted Indian silver demand. According to Metals Focus, rebounding silver sales in the countryside reflect a general improvement in the rural Indian economy.
“For instance, two-wheeler sales grew by 13 percent y/y in Q3. More importantly, cumulative sales from April to September surpassed 10m units for the first time since 2019, indicating a return to normalcy.”
A good monsoon season is expected to boost crop yields this year, pumping more money into the rural economy. This will likely drive stronger demand for both gold and silver.
Rural silver consumption accounts for around two-thirds of total Indian demand.
Record gold prices also boosted silver demand in India, particularly silver jewelry sales.
