India Silver Imports Seen Spiking In Festival Qtr.

MUMBAI (Reuters) - India's fluctuating silver imports are likely to rise 50 percent year on year in October-December quarter as investors shy away from the expensive yellow metal.

India, the world's largest importer of silver, could import 250-300 tonnes of silver during the quarter, said Prithviraj Kothari, president of the Bombay Bullion Association. Gold imports are seen rising 30-40 percent.

"Silver prices are in a comfortable range and people are considering it as a buying opportunity," said Harshad Ajmera, proprietor with Kolkata-based wholesaler, JJ Gold House.

Spot silver traded above $30 an ounce, down 39 percent from its record high of $50 hit in late April, but still up nearly 30 percent from a year earlier.

Silver prices overseas have declined 37.7 percent since an April peak of over $49.51, as against gold's 13 percent gains, making analysts more optimistic on white metal for a long-term investment.

"If one were to take long-term view, even present levels are good for investment in silver. Demand is mostly from the physical side and it is natural because after it reached new highs this year, everybody's attention is on gold and silver," said Gnanasekar Thiagarajan, director with Commtrendz Research.

Thiagarajan sees support for silver at $28-29 an ounce and the price eventually rising towards $45 by year-end.

Silver prices are likely to follow bullish gold, which is likely to touch $2,000 an ounce, said Ong Yi Ling, an analyst at Phillip Futures in Singapore.

Kothari at the Bombay Bullion Association expects total silver imports in 2011 to surpass 4,000 tonnes. This despite a 30 percent on month fall in the imports in May this year.

In 2010, the country's silver imports more than doubled to 3,029 tonnes, data from Thomson Reuters GFMS showed. In 2009, shipments had dived to 1,285 tonnes from 5,048 tonnes a year earlier .

The reason for this fluctuation is the huge stocking and de-stocking undertaken by traders for whom the silver business is a fallback in case of adverse business sentiment in gold.

BUSINESS BLUES

Its turbulence means not all want to be in the silver business.

"The silver business is sporadic, sometimes it is very profitable and sometimes you can't sell even a gram as there is a discount in the market compared to legal prices," said Daman Prakash Rathod, director with wholesaler MNC Bullion in Chennai.

Banks, primary dealers of bullion in India, are uncomfortable with importing silver due to violent price fluctuations and heavy premiums, often leaving them to survive on wafer thin margins and many times counter losses.

"Many try to trade in silver when it becomes immensely profitable when prices crash but suppliers hike India specific premium when new supply are asked from new buyers," said Rathod.

"That discourages many and the end result: Not many want to do silver."

The trade is cornered by a few private players in India, along with state-run players like MMTC and State Trading Corp.

Source : moneycontrol.com