Silver demand picks up in India.

Good rains have brought good tidings, especially for the silver market.

While demand for gold in India has picked up significantly over the last couple of days, it is the rising demand for silver that has tongues wagging.

Though India is generally believed to have a ravenous appetite for gold, it is also a major consumer of silver. Of the 4,000 tonnes that India used to import annually, around 2,600 tonnes was used to make jewellery and ornaments.

Traders maintain that the import of silver is poised to recover and may hit a fresh record next month, given the good monsoon and the resultant boost in rural incomes.

More than 60% of India's silver demand comes from farmers, who stash their savings in silver bangles and coins but, this dipped last year because income in these regions comes from agricultural output which is determined largely by the June-to-September monsoon and, last year, the country experienced one of the worst monsoon seasons in over four decades.

However,  with bountiful rains this year, the situation is set to reverse. And,  traders maintain that India's appetite for silver has also been boosted because gold has become too expensive at current prices. According to official data, India's silver imports in the first six months of 2010 are up 579%, at $1.69 billion.

Shashi Menon, a gold trader in Mumbai pointed out: ``It has been one of the deep-rooted habits of the Indian people to spend a considerable part of their incomes every year on gold and silver.''

"Today is Onam, a spring festival celebrated with much gusto in South India, especially Kerala. Much of the celebration during this time revolves around the purchase of gold and silver. Given the continued high price of gold however, people are buying silver to mark the ocassion,'' Menon added.

As of April this year, India has also started hallmarking of the white precious metal to ensure purity. With market surveys detecting increasing amounts of impurities in jewellery being sold across the country, public sector trading major, Minerals and Metals Trading Corporation (MMTC) is banking on its branded jewellery, silverware gift items and coins to push up its market share.

MMTC is the largest importer of gold in the country. The firm's silver imports fell by more than 44% in the fiscal year to end March 2010, as high prices dented demand. Silver shipments fell to 697 tonnes in 2009-10 from 1,250.39 tonnes in the year-ago period.

MMTC chairman Sanjiv Batra said the firm has roped in leading Swiss precious metals refiner Produits Artistique de Metaux Precieux to set up a gold and silver refinery at Sona near Gurgaon, New Delhi. The MMTC joint venture is set to import gold bars with 90% purity and then refine them to 99.45% to 99.95% grade. The joint venture will also enable MMTC to gain easier access to funds from Swiss financial institutions to import gold.

A Bureau of Indian Standards market survey of gold jewellery conducted in 16 major cities, including Delhi and Mumbai, had found that 147 or 90.7% of the 162 samples tested, turned out to be short of the declared purity.

Even as the government ensures purity with this move, demand for the precious white metal has not yet picked up in large metros like Mumbai and Delhi. As Pallavi J K of the MMTC said: ``As of now, there is no demand from Mumbai for the white metal. But demand has picked up significantly in rural India.'' The official went on to add: "Industrial demand for silver remains weak. Silver has moved up in tandem with gold since late July, but remains very undervalued versus gold.''

The MMTC official added: ``We have corporate orders for silver coins and silverware articles from the big cities (metro areas) and from public sector undertakings. We import most of our silver from Switzerland and Australia,'' she added.

Source : mineweb.co.za