Is silver on your screen yet?

Silver is quietly creeping into investment portfolios in India.

With popular investment options like equity, real estate, gold and art becoming not only expensive, but also risky pits to park your hard-earned cash in, a white metal "" silver "" is slowly gaining headway in various investment portfolios. Its attraction: it is plentiful (when compared with other precious metals) and relatively cheap.

However, the options available to the Indian investor in this commodity are few. "Typically, Indian investors invest in physical silver products. This demand is predominantly from rural centres and is closely linked to the monsoon and agricultural output," says an ICICI Bank spokesperson.

There is also the option of investing in silver futures, though the contracts are limited to just three months against over a year in international markets.

Globally, investors have the option of bars, coins and medallions, mining stocks, mutual funds, accumulation plans, futures contracts and options. The prospect of the US launching an exchange-traded fund (ETF) soon is expected to ease the way for the investment vehicle's launch in India.

Since ETF units are backed by physical silver, the launch news pushed up silver prices by about 60 per cent in the last one year. Back home, most local banks are considering paper products in silver, subject to regulatory approvals.

With prices of most industrial metals and precious metals rising to new multi-year highs, silver prices also saw a new 23-year high on Thursday at $12 an ounce. The surge is expected to continue over the secular term.

"With the funds already having riden a rally of over $2, the actual launch of silver ETF could spark off a strong correction. However, overall long-term impact of the ETF would be positive," says V. Sivaramakrishnan, executive director with Dubai-based Kombench DMCC.

Silver, however, has a tough battle ahead too. It must shrug off problems associated with investment in the metal and appeal to the deep-pocketed high net worth individual (HNI).

Says Sapna Narang, head of a Delhi-based private wealth management firm Capital League: "HNIs do not want silver as an investment option on their radar. Not even gold, as holding on to physical metal is complicated."

Meanwhile, demand for silver jewellery continues to be robust. According to GFMS Ltd's estimates, jewellery and silverware demand globally rose 14 per cent in 2005 as the rising raw material costs had less impact on silver demand vis-à-vis other precious metals. Indian demand also rose, leading to the doubling of imports in the January-September period last year.

Indians also splashed out cash on silver coins. While global coins' demand fell 9 per cent in 2005, it went up by 4 per cent in India following an increasing use of these for festive gifting. GFMS estimates that low-margin jewellery in India (largely sourced from scrap) would also clock double digit growth. In all, the silver charm looks set to intensify.