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Prices of precious metals continue to rise

September 05, 2019 21:13 IST

The global high comes amidst the uncertainties of Brexit, a trade war and slowing growth, with traders increasing their silver bets.

After six years, silver is trading above Rs 50,000 a kilo in the physical market in Mumbai.

Its global prices at $ 19.4 an ounce is a three-year high.

The global high comes amidst the uncertainties of Brexit, a trade war and slowing growth, with traders increasing their silver bets.

 

At Zaveri Bazar in Mumbai, the spot market price opened at Rs 50,125 a kilo and closed a little lower at Rs 49,950 - still up four per cent from Tuesday’s close.

Standard gold opened at Rs 39,091 for 10 grams, trading for the first time above Rs 39,000.

It closed at Rs 39,031. Including a three per cent goods and services tax, the price is above Rs 40,000.

“Silver December futures on the Multi Commodity Exchange also made a high of Rs 51,425 and traded at Rs 50,900, the third-highest gain on a week-on-week basis in 10 years.

"A combination of nerves over Brexit, US-China relations, etc, are making traders to shift to safe-haven assets,” said Ajay Kedia, director, Kedia Commodities.

At this level, importers say, demand has almost dried.

Viraj Didwania, director, Foresight Bullion India, said: “Domestic silver demand depends upon customers’ perception of the future price.

“Even at a time like now when prices have increased significantly over the past few weeks (35 per cent rise in three months, in rupee terms), if customers start to believe that prices are going to continue to increase or remain at current levels, demand will return.

"However, a large percentage of silver demand in India is deferrable and customers (at present) are willing to wait a few months to purchase, until they believe they are getting a fair price.”

India’s annual import of silver is 5,000 to 7,000 tonnes. Internationally, the gold to silver price ratio had been bearish on silver because of industrial slowdown.

As a result, silver was underperforming gold’s price and the ratio went up to a 25-year high of around 93 a month before. Since then, the ratio has been correcting.

Kedia states: “The long-term average for the silver-gold ratio is around 55:1.

"Silver has just begun to show signs of bullish life and has been slowly playing catch-up with gold.

"Yesterday, the ratio breached the 78:1 level and has been trending lower as silver has been making higher highs.” Currently, the ratio is around 79.5.

How long this rally in silver will continue is an issue.

Didwania says: “Given the recent increase in the price of silver, plus the increase relative to gold, I believe the bulk of the increase in silver is done and from here, there are chances of silver staying stable or going down in price.”

Photograph: Lisi Niesner/Reuters

Rajesh Bhayani in Mumbai
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