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Silver Demand Seen Rising As Prices Move South

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Anshuman Daga BSCAL

Declining international prices are likely to attract silver buyers but they are waiting for rates to bottom out, traders and analysts said on Thursday.

"Prices had gone up to abnormal highs, and so demand slumped," said Satish Bansal, managing director of the New Delhi-based silver importers, M D Overseas.

"Now, prices are back to about $5.50 an ounce. I think demand should be high. Investors are likely to be comfortable to step in at these levels," Bansal said.

On Thursday, London silver was quoted at $5.57 an ounce, up from Wednedays's five-month low of $5.46. In mid-February, when prices rose to 9-1/2 year highs of $7.90 an ounce, domestic investors sold heavily. As India depends on imports, changes in international prices affect local prices. India is the world's largest silver consumer, importing all its requirements.

 

Its 1997 demand, estimated at about 4,000 tonne, constituted about 15 per cent of the total world silver demand, analysts said."If prices go down further in international markets, there may be the possibility of increased imports," said bullion analyst Dinesh Parikh. "When the prices are high, farmers, hoarders and investors sell their silver and book profits," he said. Traders said imports in the first quarter of 1998 had been fairly sluggish but they did not confirm international estimates of a 84 per cent fall in imports year-on-year.

"Much will depend on prices. So, it is difficult to point out a clear trend in silver imports," said another analyst. Silver imports were 84.3 per cent lower in the first quarter, at around 220 tonne, industry consultants CRU International said in a report earlier this week.

CRU said Indian silver demand dropped sharply in the first quarter, and was seen staying low through to the end of the year unless prices fell sharply. Local dealers said low prices would stoke fresh demand. "Indians are purchasers at this level. At this rate, it is a good time to buy," said Mahavir Shah, a leading bullion dealer.

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First Published: May 15 1998 | 12:00 AM IST

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