Silver Rates in India

It is a common practice in India to invest in commodities along with the other options like real estate shares, mutual funds, and bonds. The most common commodities that Indians invest in are gold and silver. Given that the stability in these markets is much higher, it is a safer investment option for most people.

With the price of gold sky-rocketing, many investors are turning to silver today as a better investment option. This precious metal is also used for several industrial purposes because it is a great conductor of electricity. It is also very ductile, malleable and lustrous, making it a popular choice for jewelry today.

Silver in India is not produced but is imported from other countries. With the growing demand for silver and lesser availability in comparison to this demand, the value mostly appreciates depending upon other factors that influence the rate of silver.

Today, most of the silver that is imported is used to make silverware and jewellery. As the application of the metal in industrial purposes increases, the demand will grow as well. This means that the value of silver is bound to appreciate. India and China are the largest utilisers of silver, with a steady increase in demand each day.

Besides the demand itself, there are various other factors that affect the value of silver in the country. The most common factors are the buying and selling of silver besides the demand for this precious metal.

The value of silver is based on the activities of Multi Commodity Exchange of India. This is the equivalent of the BSE for shares and stocks. Trade in the MCX includes energy, bullion and even agricultural material besides metals like gold and silver which are known as non-ferrous metals. These commodities are exchanged and traded in bulk by the MCX. This trading activity determines the value of silver and the rate is not set of fixed by the MCX.

The price of silver varies almost every day. This rate changes as per the city that you are trading from.

The current rate (as on 02.06.2019) of silver in 1 gm in different cities is as follows:

The rates of silver each month give you an idea if the value is appreciating or depreciating. You can compare the prices of the silver month on month using the historical price of Silver Rate which gives you an idea of the highest and lowest price for each month as well.

Below is the historical price of silver rate for the months of March, April, and May which will help you understand the trend before making an investment:

In the last two decades, there has been a steady increase in the value of silver. Of course, these historical prices must not be considered a benchmark when it comes to the volatility of silver prices in the coming months and years. This is because there are several factors that play a part in determining the value or silver price in India.

That said, there has been a significant growth in investment in silver as a valuable commodity over the years. In order to make a sizeable profit from their investment in silver, investors take a lot of factors into consideration, as mentioned below:

• Investments by large traders and investors: It is important to understand that the silver market is much smaller in comparison to the gold market. This is why any large investor and trader will have a significant effect on silver prices. One of the most notable instances was that of 1997 when 130 million troy ounces of silver were purchased by Warren Buffet at a price of $4.50 per ounce. This had a significant impact on the market price of silver.
• Prices of oil: The process of mining silver consumes a lot of energy. As a result, it is quite natural that the rates of silver are affected by the prices of oil as well. In all these mining processes or any other activity that requires a good source of energy, oil is the primary option. To meet the demand of the silver in India, the amount that is imported must have a good platform of logistics. For this, a steady supply of oil is necessary. As a result, any fluctuations in the prices of oil not only affect the price of silver but gold as well.
• Demand for silver in Industrial processes: As mentioned before, silver is not used in industrial purposes as much in India. However, this trend is witnessing a change as India is also industrialising faster. This will increase the demand for silver as an industrial commodity. As a result, the rates of silver also increase.
• Taxes and import duties: Since silver is not produced in India but is imported from foreign sources, the impact of the taxes and import duties cannot be ignored. If the import duties increase, the rate of silver will increase alongside.
• The fluctuation of the US Dollar: The US Dollar index impacts the rates of silver. When the value of the US Dollar increases, the value of silver in India declines. On the other hand, when the value of the dollar falls, it indicates a possible increase in the silver rate in India.
• Rate of gold: Normally, the trend of silver rates in India is similar to the trend of gold rates in India. So, every time there is an increase in demand for gold in India, the demand for silver also increases. Similarly when the demand for gold declines, the rate of silver will also decline.
• Trade deficit: When the number of commodities that are imported increases, the trade deficit increases for the country. If the trade deficient for a certain commodity is higher, the government takes some measures to reduce to import of that particular commodity. This was observed with gold import over the last few years.
• Inflation: Today, one of the factors that are affecting silver prices negatively is inflation. This is because silver and gold are considered as a security or as an option to hedge funds in case of any financial troubles caused by inflation. Therefore, with rising inflation, the price of silver also increases.
• The concentration of short contracts or position: Today, there are about 3 to 4 large traders who hold close to 90% of the shorter silver contracts. When there is a concentration of any commodity, particularly of a commodity that is traded publically, the impact on the price of the commodity also changes. This impact is noticed on a short term and a long term basis.

Today, there are several other factors besides the ones mentioned above which are having a significant impact on the rate of silver. One of the primary factors is the rate of silver globally. It is true that silver rates in India closely follow the trends that are observed in the international market.

As mentioned before, the second most important factor affecting the price of silver in India is the price of gold. As the rates of gold increase, the rates of silver also tend to increase. In turn, when the price of silver increases, the price of gold fluctuates accordingly.

Besides this, there are several other factors that play an important role in determining the current silver rates. One such factor is the movement of interest rates in India. In addition to this inflation and various trends associated with inflation also tend to increase or decrease the rate of silver in India.

As far as the modern history of India goes, gold has always been considered the more expensive commodity in comparison to silver. This is because the primary application of silver in most parts of the world in for its industrial purposes. The value of silver drops when it is recycled.  It is usually made use of as a conductor in the production of electronic devices. However, the amount of silver available in India is lesser. Since it is a rare commodity with a higher demand when compared to gold, it is available at a lower price.

Globally, however, the demand for silver is much lesser in comparison to gold. Like any other metal or commodity, the value of silver also depends upon the demand and supply. Therefore, the global price of silver is also much lower in comparison to gold due to demand and supply.

The best option to buy silver in India is from a bank or any jeweller. When you purchase from a bank, silver is usually available in the form of silver coins. This is an expensive option as the customer also pays for the assay certification and the packing of the silver which is completely tamper-proof.

It is more expensive when you buy your silver from the jeweller. This is because the labour costs of making the articles are also added. This makes it almost 10% higher than the cost of the silver coins available at the bank. If you have to resell this silver, you will have to also pay an addition 15% towards melting costs, bringing the value of the commodity down.

The best choice to purchase silver is the commodities future exchange. This will be available to you at the exact price at the MCX currently.

The length of the silver contract is much larger when you purchase at the commodity future exchange. If you are buying silver for trading purposes, the lowest trade contract that you can get is in the 1 kilogram unit. The minimum quantity delivered is 30 kilograms.

Silver is a commodity that is freely traded. This means that you can not only buy it in its physical form but also in the electrical form. You have the choice of putting your money on silver through the futures market if you are looking at it as an investment option.

There are many reasons why you should invest in silver in India as mentioned below:

• The high demand: As discussed before, the demand for silver is high in the industrial sector as well as in the jewellery sector today.
• Demand and supply: The increasing demand for silver means that the availability of this precious metal also drops. This is even more so because silver is imported in India. For the future markets, it is predicted that the silver rates will increase because of limited supply. This will make it harder to buy silver and will put all the long-term investors in a much stronger position financially.
• An alternative to gold: Silver is usually referred to as the common man's gold because it is a lot easier to buy. With the increasing rates of silver, investors today have an additional investment option besides stocks, bonds and other traditional options.
• Predicting the market: Investment in silver is all about understanding the market and timing it. Sometimes, it is very easy to predict the silver market. The best idea is to wait for festivals or even wedding seasons when the demand for silver and gold increases.
• Lack of bank accounts: In India, a large population is not well-versed with banking processes or taxation. For these individuals, other investment options are much harder, making silver the best choice for them.
• It is easy to store: When compared to gold, silver is a lot easier to store. You can get different e-silver products on the NSEL that you can use for trading. This allows you to invest in silver without having to worry about storing the commodity.
• Better liquidity: Silver is a great back up in case you require any emergency funds. It is much easier to convert your silver into money in case of a financial crisis.

You have the option of buying your silver from a jeweller or from the bank. These are the more expensive options available. As an alternative, you can also buy silver from the commodities futures exchange.  This is an economical option available for those who wish to do silver trading.

In India today, you do not have the option of Silver ETF as yet. This is an option that is usually preferred in markets like America. Having a global trading account is mandatory in order to get a silver ETF.