Silver Rates: A Brief History
Precious metals have been coveted resources since ancient times and silver features just after gold when it comes to desirability. In fact, when this shiny white metal was first mined around 300BC, silver prices were often higher than that of gold as it was much harder to purify silver lodes using the old technology. The silver rate has varied over the years as mining of this metal has shifted from Anatolya in Turkey to Spain, South America, North America, Australia and many other places across the world. Today, this metal serves a variety of purposes and silver prices can fluctuate on the basis of their requirements in technology, chemical processes, medicine, industry, jewellery and much more.
Silver Rate in India
The silver rate today is determined by multiple factors and one of the most important among these is the various uses that we require the card for. The oldest use of silver has been in ornaments and high silver price in India have been a major reason why we have made jewelry out of it. Traditional filigree works of silver are have been the main industry across key parts of India such as Cuttack and Rajasthan and to this day, silver prices have been affected by its use for making silver coins and jewellery.
Lately, with the metal becoming an important investment alternative, the MCX silver price has gained greater prominence. However, rate of silver in commodities exchanges depends not just on the jewellery consumption but also on the uses of silver as part of the industrial setting. Strangely enough, the major portion of silver is actually not mined – it is in fact obtained as a by-product of purification of other metals like gold and copper.
Factors that affect Silver Price in India Today
Silver like most other market commodities is affected by multiple factors when it comes to the live silver price on commodities exchanges as well as the jewelry market. In most cases, gold and silver prices have been observed to have a close correlation i.e. when gold prices rise, silver prices also rise and vice versa. The following are some of the key factors that affect the cost of silver in the Indian market.
Trade Deficits – India’s indigenous silver production is relatively low and thus the silver prices would definitely be affected by the global rate. That apart, when faced with a high trade deficit, the government introduces additional taxes such as excise duty on silver imports that lead to an increase in the price of silver in India.
Gold Price – Usually gold and silver prices are closely linked thus, when gold prices rise, silver prices also feature an increase. This is because when gold prices are higher, investors interested in precious metals will tend to start buying silver at a lower price, which leads to increased demand leading to the price rise.
Price of Oil – Mining is a capital intensive process that is dependent on the price of oil. Hence, when oil prices rise, cost of mining silver also rise leading to an increase in current silver prices. This holds true for silver price in India as well as abroad.
Demand in the Industry – As mentioned earlier, silver is an important input for quite a few industrial processes in India as well as abroad. Therefore increase in industrial demand is bound to have a knock on effect on the silver market price.
Changing US Dollar Values – The price of silver in India is inversely correlated to the value of the US Dollar. When the dollar value increase silver rate decreases as the US dollar becomes a less attractive investment and the reverse is true in case of rising silver prices.
Changes in Import Duty – In India, most of the silver is obtained as an import, thus, an increase in import duty by the government would lead to a rise in the silver price per gram. Thus if the government changes the import duty, it will affect current silver prices.
Increase/Decrease in Inflation – In times of financial stress such as increase in inflation, many investors prefer to hedge their bets by purchasing precious metals like silver; this can lead to increasing silver prices.
India, silver of various purities and grades is available, but the most pure form or 99.9% silver is termed as “fine silver”. Fine silver is mainly used for various industrial applications such as catalyst as such high purity silver is too soft to be fashioned into jewellery. One of the most commonly used silver standards is the sterling silver, which features purity of 92.5% and is often considered to be the ideal purity to be fashioned into jewellery and coins. Often referred to as the 925 standard, some claim a purity of around 99.5% however w/w silver would be 92.5% of the total weight and the rest would be constituted of copper. Silver bullion and coins are also made out of this silver standard.
Silver as an Investment in India
In terms of precious nature of the metal, silver is second only to gold and it has been historically used for ornamentation, decoration as well as use as ornamentation. Hence traditionally silver investments have been made in bullion, but present day silver prices are greatly affected by the industrial uses of the metal, which greatly outstrip the use of silver in jewelry making. This is the key reason, while silver has become a leading avenue of investment in commodities exchanges around the world including India.
Its presence on various commodities exchanges is also one of the key reasons why the current silver price tends to vary from one day to another even in open markets. Additionally, shorting on commodities exchanges also plays a key role in causing variations of the today gold and silver rate that are closely linked to each other as well as to various other market factors both domestic and international.
Exchanges Trading Silver in India
The three leading commodities exchanges, where a prospective investor can trade in silver are –
- National Multi Commodity Exchange (NMCE)
- National Commodity & Derivatives Exchange (NCDEX)
- Multi Commodity Exchange (MCX)
Following are the details of the key contract types of silver that are commonly available on these commodities exchanges.
|Silver Mini||Silver Micro||Silver 1000|
|Price Quotation||Ex Ahmedabad||Ex Ahmedabad||Ex New Delhi|
|Daily Price Limit||4%||4%||4%|
|Tick Size||Re. 1/kg||Re. 1/kg||Re. 1/kg|
|Upper Limit||60 metric ton for individual investor||60 metric ton for individual investor||60 metric ton for individual investor|
Q – When does the price of silver increase?
Ans – In most cases, macro economic factors, such as inflation, weaker domestic currency, market volatility, rising oil prices and increase in the price of gold are some of the key factors that can lead to a rise of silver prices in India and abroad.
Q- In what form can I buy silver as an investment?
Ans – Silver as an investment is available in multiple formats such as silver bars, coins, ornaments, statues and as an electronic investment on various commodities exchanges. From an investment perspective, through the silver coin price or silver bars price are definitely higher even though they are linked to the commodities price, holding the metal in physical form will lead to reduced liquidity. As a result of this, silver commodities in digital format are often the preferred form of investment for a majority of serious investors.
Q – Where to buy silver bullion in India?
Ans- Bullion such as silver bars and coins are available for sale with most leading banks in India. The physical silver investments made through this route are guaranteed to feature high purity and finess. Alternately, leading jewellery stores are also appropriate investment routes for leading silver bullion purchase in India as they would also guarantee purity and fineness of the metal.
Q – Why is hallmarked silver more expensive than the on-hallmarked variant?
Ans- Hallmarking is a special process using which the precious metal (gold or silver) content in ornaments is determined. As this process is undertaken by a government quality control agency, BIS (Bureau of Indian Standards), you can be sure that your silver purchase is of high quality and will fetch good resale value in the future. This is the reason for hallmarked silver prices to be greater than the live silver price in India that you would see on TV.
Q – Which type of silver bullion is preferable?
Ans – Silver bullion is available in the form of bars as well as silver coins. Among those, silver coins are often preferred more by individual investors as they are easier to store and liquidate as compared to silver in the form of bars. Additionally, silver coins are also easier to liquidate in case of emergency so from an investment perspective they can provide much needed liquidity in a diversified portfolio.
Q- Why is the price of silver coins higher than the spot prices seen on TV?
Ans- Silver coin price is not just determined on the basis of the amount of silver they contain. There are significant charges related to designing and making them, which affect their final price. Additional charges that may be implemented on the price of silver when it comes to coins include shipping charges, transit insurance, banking costs, bullion markup etc. Adding all this together leads silver bullion in the form of coins being priced higher than the spot value of silver.
Q- Where do I invest in silver in case I do not want to invest in the physical form?
Ans- From an investment perspective, silver in the form of paper is probably the best choice simply because it is easier to buy, store and liquidate. The metal is available for buying and selling on three leading commodities exchanges namely MCX – Multi Commodity Exchange, NCDEX – National Commodity & Derivatives Exchange and NMCE – National Multi Commodity Exchange.
Q- What are leading paper silver investment options in India?
Ans- The major contract types of silver available for commodities investment in India include Silver Mini, Silver Micro, Silver 1000 and Silver Futures Contract. The price of silver may be slightly different in case of each of these contracts and there are usually different caps on the amount of silver that you can buy or sell depending on the type of silver contract you purchase.
Q- Are there any tips and rules when buying silver as investment?
Ans- For starters you should start with small amounts especially when buying from a dealer. Like any other purchase, the present rate of silver needs to be considered before the purchase, so try and time the market to the most accurate extent i.e. try and buy when the present silver rate is as low as possible. Do your homework regarding the dealer so that you are not duped.
Q- Where can I sell the silver coins/bars that I have?
Ans- In India, most dealers who sell silver will be agree to buy it back. That said, there is a trick to getting a good price for the silver that you are selling. The best silver prices at the times of sale are obtained in case of hall marked products. The price of silver coins may increase or decrease based on the demand and supply of the type of silver coins in the market. Additionally, there is a possibility of old silver coins having greater value that the actual price of silver they contain due to historic reasons. It is also best to shop around for the highest silver prices that you can receive before actually conducting the sale.
Q- Will Silver Prices rise in 2017?
Ans – It is impossible to predict the future, however, considering that overall there has been a supply glut the world over in terms of oil as well as other commodities available in the market, it is only a matter of time before silver prices rebound. That said, whether this will happen in 2017 or later on is an open question and only time will tell if gold and silver prices will follow the expected trend.