Volatile gold takes sheen off silver

After scaling an all-time high of Rs 12,260 per kg on Tuesday, prices are heading south

Silver prices perked up by Rs 200 per kg today in the Mumbai bullion market after they plummeted by Rs 300 in the mid-session to finally settle at Rs 12,150 per kg, posting a one-day loss of Rs 90, on Wednesday.

The current price volatility in the while metal markets is mainly attributed to intermittent fluctuations of gold in the domestic as well as the international markets.

After scaling an all-time high of Rs 12,260 per kg on Tuesday, silver declined on Wednesday mainly because the local traders abstained from free buying.

"Currently, selling prices of silver are below the cost levels. The average sale price of Rs 12,200 per kg in the markets stand higher vis-a-vis cost that stands at Rs 12,800 per kg. So, traders have gradually started to exit the market for the time being till the prices again go down below the Rs 11,500 per kg level, at which they expect to see orders flowing in," Tapas Suresh Hundia told Business Standard.

At present, traders are more keen on buying silver obtained from mint, as currently mint silver is widely sold at Rs 11,700 per kg, and it can be made pure on spending just Rs 200 per kg.

Generally, good demand for silver is seen at prices ranging between Rs 10,500 per kg and Rs 11,500 per kg. Once prices move beyond the range, demand falls drastically. So, there is not much demand of pure silver of late.

Coming back to Wednesday, despite shedding Rs 90 in a single day, the price remained Rs 425 higher at Rs 12,150 per kg on a one-month comparison.

In the pre-open trade, silver marketed 10 cents lower in New York on Wednesday at $8.14 per ounce after touching $8.22 per ounce at one stage, the highest since April 2004.

"Silver prices have been moving in tandem with gold prices - following gold's direction throughout. The white metal has never moved independently and, this time too, we aren't going to see any exception," a trader said.

Silver (Ahmedabad) on Multi Commodity Exchange of India lost Rs 200 to Rs 12,200 per kg on Wednesday, but it recorded an overall gain of Rs 750 on a one-month comparison.

On National Commodity & Derivatives Exchange, too, silver (Delhi) and silver (international) lost about Rs 70 each but gained about Rs 700 and Rs 800 in one month to Rs 12,246 and Rs 12,417 per kg respectively.

"The poor man's gold is on high demand, especially from rural Indians who, being from a much lower-income section, cannot afford to buy gold at the prevailing high levels," the trader said.

Again, the dollar factor, the currency being higher vis-a-vis the euro ahead of 'Thanksgiving' - a holiday in the US, is pulling down silver prices substantially in other markets.

Meanwhile, the dollar declined against the yen as players sold the greenback following the release of the US Federal Reserve's recent meeting.

Silver stocks were down by 542,792 ounces at 117,607,780 ounces.

The trend of slump in silver prices in the domestic market is unlikely to continue as traders are confident of pushing the white metal trade forward, the trader added.