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India, China and Growing Silver Demand

Wednesday October 17, 2012 14:16

With the Indian rupee having gained 7.3 percent against the U.S. Dollar since the end of August alone, silver prices express in rupees will likely soften in the near term.

This led at least one analyst to predict that silver's price direction in the short term could depend on Indian investors.

Combined with seasonal demand, a strengthening rupee could impact physical demand for silver going forward at a time where strong physical demand is the only thing left keeping many weak silver longs from panicking.

Large Non-For-Profit Seller Reported

Furthermore, in a relatively thin market conditions surrounding the Columbus Day U.S. holiday weekend, the silver market once again reportedly saw a very obvious and large “not for profit” seller start to show up.

The all-too-familiar resulting decline in silver futures prices seemed designed to trigger stops placed by weak longs, thereby causing even longer term silver holders to express concern.

However, the manipulation does not seem to working this time. The longs have remained, with some traders merely buying dips in the day to day price action. Tuesday’s session was a good example of this.

Silver Remains Popular in China and Indian Demand May Rise in November

Despite the sharply rising rupee potentially dampening Indian demand for silver, the grey precious metal has stayed in vogue in other parts of Asia.

For example, silver futures were up 29% on the Shanghai Futures Exchange at the end of September compared with the end of June, while gold gained only 13%, according to data from the exchange's website. Silver has been one of the biggest recent gainers in the metals complex traded in Shanghai.

Furthermore, Chinese demand for physical silver delivery has not changed that much. China currently remains a net importer of silver when it had been a net exporter of the metal for many years.

Despite the popularity of silver with the Chinese, the silver market seems more focused on Indian investors and their potentially decreased interest in silver due to their currency’s sharp appreciation instead. India reportedly amounts to 12.6 percent of the overall global demand for silver.

Nevertheless, other observers noted that cultural factors in India may have been more responsible for the reduced Indian demand for silver in October, leading them to expect that strong demand for silver from Indian consumers will resume once again in mid-November.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

By Dr. Jeff Lewis,
Editor, Silver-Coin-Investor.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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