Bullion market yet to recover from silver shock

A month back, silver was the favourite of investors but, today, they are scared of it. The unusually high volatility in silver prices which fell from Rs75,000 a kg to Rs51,000 a kg in less than 45 days, has killed the spirit of investors.

The high volatility in silver prices and the stagnation in gold have forced investors to hold their plans to invest in bullion. Experts and traders say the demand for the precious metals has been falling for the past one month.

Traders believe that, at least for a few weeks, the price of silver will fall further till it touches Rs48,000 per kg. Gold, however, is likely to stay stable at around Rs21,000 per 10 gram. Investors are closely watching price movements and waiting for the appropriate time to start investing in the precious metals.

The drastic fall in silver prices stunned investors. A large number of investors lost a lot of money though there were many who made money too by selling silver when its price was at its highest. Now, however, investors are unwilling to buy precious metal for fear of losing money.

The impact of the silver crash has been such that even the wholesale and retail market has been hit with business coming down by 40% in the last couple of months. “There has been a fall of almost 30% to 40% in business as compared to the previous two months,” said Girish Choksi, former president, Choksi Market Association of Ahmedabad. 

He further said that it was a wait-and-watch period for bullion traders and investors. "Both gold and silver seem to have become range-bound due to which very few new investments are being made. As a result, even retailers are placing few orders. Hence, wholesalers do not stock up or place large import orders," Choksi said.

The retail gold and silver ornaments market is also depressed at the moment. Manoj Soni of AB Jewels said demand had fallen substantially as compared to the increase witnessed when silver and gold prices had reached an all-time high.

"Investors are not buying as they fear further fall in prices. And traders seem to be buying gold and silver just to maintain their stocks," said Soni.

Natubhai Choksi, a wholesale ornament manufacturer and trader of the state, said they were expecting silver prices to fall further to Rs48,000 per kg in the next couple of months. "The market, at present, is unpredictable," he said.

Another jeweller, Rohit Choksi, said, "The market is so volatile that nobody dares invest in silver. As for gold, nobody is investing in it because it is currently not profitable to do so."