Looming political shake-ups suggest a change in precious metal imports

An easing of restriction on the import of gold in India could dramatically alter the country’s demand for silver, reports suggest.

Recent reports by Reuters suggest shipments of silver to India – the world’s largest consumer of the white metal – are set to fall from the record high levels experienced in 2013 because of looming political elections.


However, Birmingham-based Rob Halliday-Stein, managing director of Bullion By Post, doesn’t think the industry should read too heavily into the Indian situation or make snap judgements on silver investments.

He told Professional Jeweller, “The long term picture for silver is governed by so many factors it’s difficult to predict. Guessing what the silver price is going to do is a dangerous game unless you like to gamble, but I believe the long term fundamentals for silver are still very strong.”

India, which currently accounts for 20% of the world silver consumption, tripled its imports in 2013 to 5,478 tonnes after restrictions on gold imports (including a hike in import duties to a record 10% to cut) were put in place to cure a worryingly high current account deficit and combat illegal smuggling.

In protest, India’s gold industry is planning a one-day strike next week, with 500,000 jewellers and wholesalers expected to shut-up shop for one day as a symbolic gesture.

Things look set to change, however, as Finance Minister P. Chidambaram announced he would strive to review the unpopular gold curbs by mid-March, ahead of an election expected in May.

According to Indian analyst Sudheesh Nambiath writing for Thomson Reuters, "Silver jewellery fabricators are going slow re-stocking, and also with elections approaching the market is short of idle cash, which again points to a lower turnover of stocks, resulting in a slowdown of imports in coming months."

Observers who are preempting market changes believe an easing of gold restrictions could remove demand for 2,000 tonnes of silver as an ‘alternative asset’ for investors.

Additionally, buyers who survived on silver as a reaction to gold curbs could see a return to more varied options in the precious metal market.

Yet, the ripples of this change might not necessarily impact the UK industry in the next six to 12 months. Halliday-Stein added: “Anyone who tells you they know how the silver price will change is either lying or thinks they’re better than they are.”

“The only thing that’s obvious at the moment is that prices are lower now than in the last two years. Where it will be in the next 12 months? We’re not in the business of predictions and promises,” he added.