Silver bulls’ confidence growing

In response to the general positive trend at the global markets, the Indian futures markets has recorded significant gains in the silver price. At the Mumbai Multi Commodity Exchange, silver futures for March delivery climbed 1.28% (close to 700 rupees) to 56,260 rupees per kilo. Market observers expect that the Indian silver price will continue to rise as central banks move towards further stimulus measures.

Besides silver, gold and most base and non-ferrous metals also recorded gains. During Friday’s session at the New York Comex the gold price climbed $10 to $1,665 per troy ounce. Indian gold and silver prices also recorded gains. Last week market observers were still cautious about future price developments, as the Indian government has significantly raised the import taxes on both metals. At current prices, taxes on gold imports will increase from 300 to 540 rupees per 10 grams. In regard to silver, import taxes have doubled to roughly 3,100 rupees per kilo. Experts believe that this tax increase, together with the strong devaluation of the rupee, will hurt Indian demand for these metals. Nevertheless, so far there have been few signs of decline.

In recent weeks, and due to significant gains in the US dollar, gold and precious metals have been under sales pressure. The main reason for this development have been increased fears about the European banking system,as during the second half of 2011 US money-market funds drastically cut their exposure to the eurozone. As a consequence, European banks have suffered a shortage of US dollars – a problem that the increased swap lines between the European Central Bank and Federal Reserve was designed to alleviate. This demand for dollars has capped advances in precious metals recently.

News of further stimulus measures from the Fed this week (with an FOMC meeting on Tuesday and Wednesday) will spur gains in the metals, though if Bernanke disappoints the markets further price consolidation could be in store for gold and silver.

AuthorRoman Baudzus

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