Silver Stories in line

Silver prices have run up on buying from all sectors. What started as catch on rally to gold has led to one way frenzy in the white metal. The Prices have run up from $39 to $49 in one single run and in Indian markets from Rs 42000 to Rs 73000 in pretty much the same way, gaining a surprising rs 1000 to 2000 pre kg on most days in month of april.

There is shortage of physical silver in global markets. There have been reports from various mints of insufficient supplies. US mint has been quoting several weeks of waiting period of for delivery. US also has reported of coins selling at premium of near 10%.

The Indian physical market also is facing a crunch after prices hit all time high above Rs 73000 / kg. The traders cite a waiting period in Indian markets of near 2 weeks with a premium quoted of 2-3%. And the traditional Indian sweets have the silver foil on them missing! But not all silver shops are showing profit.

Indian investors this time around are not going for silver showpieces or cutlery as has been the cast till couple of years back. This time it is strictly coins and bars which have seen a strong uptick in demand.

Talk to couple of jewelers in Zaveri bazaar Mumbai, and they will tell you how retailers are buying small quantities on weekly basis , and housewives coming in to sell gold to buy silver as everybody is talking about silver inching to Rs 1 lakh per kg by this year end.

But there is caution as well at these current levels, as silver is technically overbought on the charts. The gold-silver ratio is at decades low. And the market has history of collapses after sharp spikes that move too fast too soon. Last time silver touched $50 in 1970 it has fallen to $12 in 8 weeks !

There is lot of speculation on iShares holdings, on whether it does hold the amount of silver it claims it does. As for every share that gets bought , the trust has to back it up with equal amount of physical silver. But is there that much easily available?

The panic demand or the rush to make money in silver has taken prices up because if you look at the genuine demand supply figures as compared to 2010 or 2009, nothing justifies a 60% jump in 4 months. The industrial demand , fabrication industry or the ornamental demand for jewelry ,coins , silverware has not run up significantly.

But the investment demand has run up on this relatively low priced commodity. The weak USD, now at 3 year lows Vs major 6 world currencies has led to money flowing into precious metals. The safe haven buying due to geopolitical crisis in middle east and Africa also has made the case stronger for investment in Silver.

Silver lining to Silver sky as they say!