The Indian metal market offers an array of metals out of which silver is one of the most appreciated one. For years now, silver has been valued as a precious metal that has been used in the production of bullions, coins, jewellery, tableware and other items. In India, silver is mainly imported than produced due to which its rate change on a daily basis.
Apart from being a good source of investment, silver has a few special properties that make it a good conductor of heat and electricity. Silver is a very soft, ductile, malleable and a reflective metal that has the highest conductivity among various other metals. Silver is widely used in the making of silver jewellery as it does not react with air or moisture.
The demand for silver is increasing in India as it is a versatile metal that is used in industrial applications. Silver along with gold forms about 10% of commodity imports in India. The demand for silver in India has outplayed its supply with industrial applications consuming more than half of its supply. The silver commodity in India has become dearer and the prices for it are fixed on a daily basis depending on various factors. In India, trading for silver is done through Multi Commodity Exchange (MCX), an autonomous body that conducts trading of various commodities, excluding non-ferrous metals.
Silver rates in India are not determined by MCX and are dictated by various factors that majorly influence it.
Silver, being a precious metal, finds itself among the likes of gold, platinum, palladium and others. Since this beautiful white metal has always been in demand and has now become an investment commodity, here are few factors that affect the everyday changing silver rates in India.
Demand and supply factor: The demand and supply equation is one of the major factors that heavily affect the silver rate in India. An actual increase or decrease in the demand and supply ratio of silver would lead to an increase in the silver rate. Large investors and traders too influence the silver rate with the example being that of Warren Buffet, who in 1997, purchased 130 million troy ounces of silver at $4.50 per ounce.
Oil prices: Mining of silver is an exhaustive process due to which its rate is directly influenced by the changes in oil prices. Imported silver requires a strong logistics platform that is backed by a constant oil supply. Any change price of oil leads to a change in the silver price.
Industrial demand: As India heads towards industrialization, the need for silver as a commodity has increased, thus triggering a rise in the silver rate.
Import duties: Silver is a commodity that is imported to India. Due to this, the silver rate is directly affected by the rate of import duty. A high import duty leads to a direct rise in the rate of silver.
US dollar fluctuation: Silver rates are inversely affected by the USD index. The weakening of the USD leads to an increase in silver rate, while the strengthening of the USD leads to a decrease in the silver rate.
Gold rate: Ideally, silver rates follow the trend of gold. If there is a spike in the demand for gold, which will lead to an eventual increase in the gold rate, then silver will also follow the same. Similarly, decrease in gold rate leads to a dip in the silver rate too.
Trade deficit: The greater the number of imported products, the higher the trade deficit of a country. Increase in trade deficits leads to the government taking steps to restrict the import of those commodities as it did in the last few years on the import of gold.
Inflation: Commodities such as silver and gold are one of the preferred choices that provide a hedge against inflation. Prices of silver tend to increase owing to inflation.
Large Concentrated Short Position: Currently, 3 to 4 of the silver traders hold 90% of all the short silver contracts. This kind of holding of a publicly-traded commodity in the hands of few can lead to an increase in the silver rate.
India has traditionally been a place where people have great fondness for investing in precious metals such as gold and silver. By the virtue of being more affordable, silver has become one of the preferred investment options in India as it offers liquidity and great price discovery. The largest portion of silver in India is consumed by the industrial sector with the rest being invested in commodities and jewellery. Looking at the popularity of silver, here we give you a few reasons why investing in silver is a good idea.
Silver in India can be invested in the form of silver jewellery, silver coin, silver ETFs, artefacts, utensils and other items. Silver coins can be purchased from a bank or jeweller. However, silver coins purchased from banks can be a little expensive as packing and assay certificate charges will also have to be paid. Also, it is always a good idea to purchase silver coins as they are less expensive than artefacts and silver jewellery. For silver jewellery and artefacts, making and melting charges also have to be paid. Silver ETFs can be purchased in India through MCX, NCDEX and NMCE.
People can trade or invest in silver just like trading in equities. Silver as a commodity is traded at the below three commodity exchanges in India:
In order to trade silver, investors need to own a Demat account and can further purchase silver online.
Trading for silver in MCX is carried in the below three contract types:
NSEL is National Spot Exchange where investors can trade in e-gold and e-silver and other commodities. To trade in NSEL, it’s important for investors to open a DEMAT account with any of the depositories mentioned on their website. Trading in NSEL can be done from 10 am-11:30 pm and investors can purchase up to 1 unit to 100 gms of silver on a particular day. E-silver can be converted into physical form or money by the process of trading.
Pure silver known as fine silver has an actual silver content of 99.9%. Fine silver is too soft and is often mixed with other metals to make it hard. Sterling silver has a purity of 92.5% pure silver mixed with 7.5% other metal. Sterling silver is created using pure silver and copper. Although sterling silver is more durable than pure silver, the additional alloys added in sterling silver makes it more prone to tarnishing.
While buying silver, purity is one of the most important factors that you should consider. As many Indians invest in silver, it’s imperative to understand the ways by which one can easily test silver purity. Following are the points that confirm the fineness of the silver metal. Few of the below ways help you test silver purity in an easy way: Check for the markings: The most obvious way to test the purity of silver is by checking the markings. Markings give you an idea about the measure of silver content. For example, a metal that is “975” silver is actually 97.5% silver. If it says “Sterling .925,” likewise, it would be 92.5% silver.
Here are a few common names that define silver purity
| Purity (wt.%) | Fineness | Common Name |
|---|---|---|
| 99.9 | 999 | Fine or pure silver |
| 95.8 | 958 | Brittania |
| 92.5 | 925 | Sterling silver |
| 80 | 800 | Jewellery silver |
Unique properties of silver make it a useful metal that is mainly used for many purposes:
Silver is a non-ferrous metal that is malleable, ductile, and lustrous and is one of the highly demanded precious metals in India. Here are a few facts that one should know about silver:
Who decides the silver rate in India?
The silver rate in India is fixed by the organizations involved in the selling and buying business of silver.
What is the reason for a rise in silver rate?
Silver rates rise due to the weakening of currencies especially dollar and market volatility.
Can I purchase silver coins in India?
Yes, you can purchase silver coins in India from a bank or jeweller.
When is the best time to purchase silver in India?
The best time to purchase silver in India is when the market is stable and you are ready to invest in it at the existing prices.
Do I have to pay GST while purchasing silver in India?
Yes, you will have to pay 3% GST on the purchase of silver in India.
Is it necessary to buy a silver ornament that is hallmarked?
Yes, a hallmarked silver ornament specifies that the silver content in it is pure. Hallmark is used as a seal that assures the silver purity.
