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India Buys Silver

Written By Brian Hicks

Posted October 10, 2013

India is the largest importer of gold and silver in the world. The government recently tried to tighten its hold on gold by boosting taxes and restricting gold imports, which led to increased smuggling of the precious metal, among other things.

But now, as the festival season approaches, Indians need legitimate access to precious metals. And analysts are expecting silver purchases to increase.

silver 18The Value of Precious Metals

Indians view precious metals, particularly gold and silver, in high regard. In India, precious metals serve not only as an investment, but also as a valuable gift. The wedding and festival season in approaching now, so this is a popular time to buy gold and silver to offer to the married couple.

Lately, though, many Indians are starting to buy silver more than gold. One reason for this is the price of gold, which is usually about 60 times more expensive than silver. But the government has also increased the duty on gold three times this year to 10 percent, as Reuters reports. Due to these increases, the country has decreased the number of tonnes it’s importing.

You may be wondering why the government would do this with such success in the gold market. The government’s goal is to narrow the nation’s account deficits, which has already decreased to $6.7 billion bringing its lowest amount in 30 months. Importing gold directs money toward foreign entities and away from domestic spending.

Instead of gold, India has started importing a record high amount of silver. From January to August, it imported 4,073 tonnes of silver – twice as much as it did during the entire year in 2012. The record high in 2008 was 5,048 tonnes, according to Reuters, but that was for the entire year, so it’s likely 2013 will surpass this number.

The government is setting people up to buy silver over gold. According to Nikos Kavalis from Metals Focus Ltd., India imported $1.78 billion worth of silver during Q2. This is a significant increase of 311% compared to last year’s second quarter.

With more silver available at a decent price, it will be more attractive to people in rural areas as well. Silver will be taking over jewelry cases, and at the lower price, people will be drawn to it.

And when demand increases, so will prices.

Investing in the Silver Rush

As an investor, it’s likely you’re thinking silver is a good investment right now. You’d be right.

The government shutdown in the U.S. has sent gold up 3%, but silver’s 6% rise has made it more valuable. It’s no surprise people are running to buy gold and silver as the economy lies in the hands of politicians.

Precious metals have always been seen as safe haven investments. They can act as a store of wealth, and they often move contrary to the dollar. If a government default pushes the dollar down, gold and silver should shoot up.

The United States isn’t the only reason precious metals are good right now. Middle Eastern and Eurozone issues just compound the need for people to diversify their portfolios with this type of investment.

You have a few options when it comes to silver investing.

  • You can buy jewelry or bullion.

  • You can invest in exchange traded funds, which can be more convenient to buy, hold, and sell than physical silver.

  • Mining stocks are another option, though they haven’t been performing as well lately. Be sure to research which companies have cash on hand and how the price of metals will affect mining operations.

  • Futures and options can be risky but can produce great returns. These are for investors ready to throw big money into precious metals, hoping for big returns.

  • If you’re not interested in holding physical silver or investing in silver-related companies, you may want to simply invest in certificates. Holding certificates can be just like buying silver, but you don’t have to transport or store it. The certificate serves as proof that you own the silver.

Get on India’s silver train. It’s taking off, and you had better be on it so you can reap the benefits.


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