India Silver Imports Poised to Recover .

MUMBAI -- India's silver imports are poised to recover from a first half slump as normal monsoon rains will boost rural incomes and therefore demand, industry officials said Thursday.

More than 60% of India's silver demand comes from farmers, who stash their savings in silver bangles and other jewelry. Good monsoon rains boost farm output, enhancing the spending power of the millions of people employed in agriculture.

India's weather department has forecast that June-September monsoon rains will be normal, providing relief after the country last year experienced one of its worst-ever droughts, which hurt farm output and left little scope for rural spending.

Silver demand has subsequently been muted this year. High prices have also dented purchases, and imports of the metal are estimated to have fallen to 300-500 tons in the January-June period from 600 tons a year earlier, industry officials said.

"Daily offtake could jump to 20-30 (metric) tons if the rains are normal this year. But prices will need to correct a bit as well to push sales further," said Prithviraj Kothari, director of RiddhiSiddhi Bullions Ltd.

Daily sales are currently around 2.5 tons, despite jewelers offering price discounts of 10%-15%, Mr. Kothari said. But he added that silver scrap sales have jumped to 500 kg-1 ton from close to nothing a few months ago.

"Silver imports are likely to pick up during the rest of the year and could be around 1,500 tons this year, from around 1,200 tons last year," added Suresh Hundia, president of the Bombay Bullion Association.

In Mumbai, the country's main bullion market, silver prices were 30,095 rupees a kilogram Wednesday, just shy of the all-time high of 30,400 rupees.

"The rally in prices has extended for a long time, and a correction is likely anytime now," said Mr. Hundia, adding that brisk buying could start if prices decline to 24,000 rupees-25,000 rupees levels.

Bhargava Vaidya, director of B.N. Vaidya & Associates, said prices are likely to decline to 28,500 rupees in the next couple of months, but they will continue to be volatile for the rest of the year.

"There will be a recovery in demand compared to last year. But I don't see a great improvement and imports could be the same as last year or slightly higher," Mr. Vaidya said.


Source : Online Wsj