The white metal, which is in short supply, is trading at $47.70 an oz and fast approaching the highest price of $49.45 reached in January 1980.
Silver, currently the highest profitable investment product, is trading at a premium of Rs 1,000-1,500 a kg. A spurt in investment demand from the lower middle class segment has resulted in a scarcity of the metal in the physical market, inducing the rise in prices.
Against the import price of Rs 71,500-72,000 a kg (on the price at which silver was booked), the metal was traded late Saturday evening at Rs 2,980 a kg in Zaveri Bazar, Mumbai.
The precious white metal has offered 133 per cent return in the past one year, which, investors say, will continue in the future as well. They are still pumping in money in anticipation of another price-rise, though analysts are skeptical of any upward movement going ahead.
This month alone, spot prices for silver surged over 41 per cent to Rs 73,500 a kg from Rs 52,000.
“Investors’ money flow in silver, which was unheard of earlier, is creating problems that are proving to be difficult to manage. There is a craze towards silver, despite an imminent steep correction,” said Suresh Hundia, ex-president of Bombay Bullion Association (BBA), leading silver trader and one of the largest bullion traders in the country.
Silver is trading at $47.70 an oz and is steadily approaching an all-time high of $49.45 an oz witnessed in January 1980. That was the time when Dallas-based Nelson and William Hunt had stockpiled the metal to create an unusual demand. They were convicted in 1988 of conspiracy of manipulating prices.
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Bullion traders did not anticipate such a bullish demand trend earlier and, therefore, could not build stocks. Since demand has been so sudden, they have been delivering the metal after two days of booking. “Still, investors are reluctant to park their money in this investment product,” said Hundia, adding that major demand was seen in the 800 grams-1 kg bar segment on Saturday.
Bhargav Vaidya, an analyst with B N Vaidya & Associates, confirmed that premiums had shot up at the spot market in the last couple of days because of short supply.
Silver, which is primarily used in jewellery, electronics and for investment, rallied the highest — 51 per cent — this year. GFMS reported that investment demand for silver had climbed 40 per cent to a record high in 2010 and its use had jumped to a 10-year high.
As a thumb rule, around 70 per cent of global silver output is used for industrial purposes, while 30 per cent goes into making jewellery and other aesthetic value-added applications. The recent investment trend in silver has emerged mainly due to unaffordable gold prices.
According to Gnanasekar Thiagarajan, Director, Commtrendz Research, the rise in silver prices still holds some rationale. Investors and users have started taking silver as a proxy to gold. For future, Thiagarajan says, both gold and silver will move hand-in-hand. Silver got support as dollar was languishing near a three-year low against a basket of currencies, but prices are due for a sharp correction following worrisome level of the US budget deficit.
Meanwhile, gold prices set new records in the domestic as well as global markets to hit $1,512.50 an oz, leaving very little room for investors to get higher returns. Gold closed at Rs 22,030 for 10 grams (as) on Saturday compared to Rs 21,760 the previous day in Mumbai.