Silver has traditionally been considered the poorer cousin of gold. Silver is often compared to gold as a precious metal, but what makes it such an interesting investment is it’s industrial use. While gold and silver prices have tended to follow each other over time, silver, over a long historical period, has outperformed gold.
Demand and Supply factor
Silver is produced throughout the world. But the primary source of silver is not the silver mines. Silver mines produce around 25% of the total world production of silver. Rest is derived as a by- product from gold mines, copper mines, lead and zinc mines and other sources. The total demand for silver in the world is around 29,000 tons while the production is much less than this.
The silver prices have almost doubled in 2010.This rally has been driven by investment demand in the safe havens like the still recovering US and Europe economies. In addition, industrial demand for silver in the emerging markets is increasing the prices.
India hardly produces any silver and is primarily a silver importing country. Over 50% share of silver import in India is from China. In India, investor’s have limited ways to invest in silver. While Gold ETFs are popular, asset managers are not allowed to hold silver directly in ETF or mutual fund form, leaving investors no choice but to buy silver futures. Also jewellery has been a source of demand for silver and with gold prices at their current levels, more and more demand is going to be there for silver ornaments.
The National Spot Exchange Limited (NSEL) has introduced E-series products in commodities. To start with, they have launched E-Gold and E-Silver.
Investing in E-silver is as simple as buying equity shares. You have to open a demat account for this. Clients interested in buying E-silver need to transfer sufficient money to their respective broker before placing the order. Once the money is transferred, one needs to call the broker and place the order. After the execution of the purchase order, silver is transferred to client’s demat account in T+2 days.
If the client wishes to sell his holdings, he should transfer it to the broker’s designated account and place the sell order through the broker. After the order’s execution, funds are transferred to client’s account in T+2 days.
Options to take physical silver
If the investor is interested in taking the physical delivery of silver against his holdings, he can surrender his holdings to the exchange and get physical delivery of silver subject to certain conditions. Delivery is offered in specified denominations and at specific locations only. Presently delivery of physical silver is available at all Metros and few other cities. The exchange will keep on expanding the number of centers in future to offer physical delivery. It is available for delivery in multiples of 100gm, 1Kg and 5Kg.
Silver tend to appreciate with a growing economy (because of the industrial demand) while gold will appreciate when economy is going down or slow. Silver can occupy a small portion in your total portfolio and investing through E silver will be a better option. This will help you to accumulate Silver in smaller quantities over a period of time.
You must keep a watch on the business cycle movement and its effect on silver prices to get the best out of it. While price movements in gold will be slow and steady, the price movements in Silver can be steep. Recent correction can be used as an opportunity to start investing in Silver with a long term investment horizon.