Silver prices under pressure

In recent weeks the rupee silver price has been in a downward trend. In today’s trading at Indian futures markets, silver contracts dropped by an average of 1,115, rupees down to 50,651 rupees per kilo. At the Multi Commodity Exchange, futures for May delivery – one of the most actively traded contracts – dropped by 2.2%.

Indian silver prices usually follow the developments at the global markets, which lately have been in a downward trend. Leading Asian markets such as Singapore saw the silver price drop as low as $26.74 (1,5%). Declining demand at the spot markets has also had a negative effect on the development of the silver price. During the Indian festival season in October and November Indian demand for physical silver was strong, but according to local dealers now purchases have decreased. According to a report from the research company Karvy Private Health, India’s four southern states show the highest demand for precious metals such as gold and silver. Indian citizens are well known for their fondness of physical precious metals in form of jewellery, bars or coins, and the southern states account for 40% of global Indian demand. Indian demand for silver and gold exchange-traded funds (ETFs) has also boomed in recent years.

Some analysts are convinced that the silver price will continue to depreciate and could fall as low as $20 per ounce before we see a trend reversal. Since early May the silver price has been under strong sales pressure at the paper markets. Though global demand for the white metal remains strong, liquidity concerns have encouraged many investors to sell silver. Until inflationary expectations pick-up, silver prices will likely remain in the doldrums.