Silver could be new gold; prices may rise 20% in 2017

KOLKATA: Commodity experts and bullion traders feel that silver can trump gold in coming months as demand for the metal is increasing for solar panels and electronics sector. Demand for silver is increasing in the home décor and fashionable jewellery categories in the country which may push the price of the metal by almost 15-20% in 2017, feel the traders and analysts.

India had consumed around 7,000 tonnes of silver in 2015. Of this, 1,900 -2,000 tonnes were consumed by the industrial sector. In 2016, from January to July , imports of silver fell over half to 2,111 tonnes from 4,362 tonnes in the same period last year.

Bullion traders feel that this year the total import may not cross 5,000 tonnes as demand was low and traders, who had imported huge volumes of silver in past years, were offloading the metal in the and booking profit.

"In 2015, rural India went through a drought and their purchasing power decreased sharply which has been reflected in this year's rural off-take of demand. But this year, rains have been good, and once the cash flow increases in the market, we see good demand to emerge for silver in rural India," said Surendra Mehta, general secretary, India Bullion & Jewellers Association (IBJA).

"We are expecting silver price to appreciate by 15 -20% next year," Mehta said.

Silver has gained 16% in 2016 in comparison to gold, which has appreciated 9% in the whole year. On Monday , silver was trading at `38,500 per kg.

Gnanasekar Thiagarajan, director, Comtrendz Risk Management Services, said: "Gold price has fallen since November 8. The price of silver, which also falls in the precious metal category , has dropped in tandem with gold but the decline in silver price is lesser than gold.But we have seen that when gold prices rally, silver prices outperform gold. 2017 is expected to be a good year for silver.Investors, who want to take a position in silver, can get good returns if they stay invested for a longer horizon." He pointed out that there is a fear in the mind of Indian consumers that government will put a cap on gold holdings.