Silver prices likely to touch Rs 12,500 a kg by Diwali

Silver prices strengthened further to Rs 11,750 per kg on Tuesday, a gain of Rs 600 over last week. Though it opened lower by Rs 100 per kg in early trades today, rising gold prices fuelled a recovery in the metal.

"Silver prices have not yet picked up in line with gold because of poor retail interest and profit booking by stockists. But, once the rupee settles down, silver would see unprecedented upwards movement, which could run to even 40 cents," said Suresh Hyundia, a trader in Mumbai.

Silver prices are projected to touch Rs 12,500 a kg by Diwali owing to the bullish trend in gold and crude internationally. By the end of the current calendar year, the white metal is expected in the range in of Rs 11,500-Rs 13,000 a kg.

Silver is witnessing undercosting by more than Rs 500. Cost insurance and freight (C.I.F) rate comes to around Rs 12,400 against the prevailing price of Rs 11,750 per kg in India. Therefore, imports have become need based. But with marriage season round the corner, demand is expected to increase.

"Diwali and Dhanteras demand has not yet picked up as retail consumers are hesitant to buy at this rate. Though silver was quoting at similar prices last Diwali, retail consumers were more enthusiastic because of less volatility," Hyundia said.

The country consumed approximately 2,480 tonne of silver last year, of which 1,710 tonne was imported. Kolkata and other mint sold approximately 616 tonne of silver in the market. Jewellery and coins are the two major silver consuming segments in India.