Silver Investment in India - Good or Bad

Silver Lining to Your Dark Cloud

India has been a traditional land where people have shared immense value for owning precious metals like gold and silver. For thousands of years, silver has maintained a positive commercial demand as an investment, currency, and storehouse of value. The precious metal also features in the stocks exchange as a traded product.

Investment in silver is a measure to counter inflation hedge and advantage, security towards protecting our kith and kin from a financial or economic crisis.

Silver v/s Gold

Silver rates are hands down more affordable to the common man, while gold is mostly looked upon as wealth accumulation. Silver is somewhat volatile as compared to gold.  Currently, silver is trading with 14.18 with a spread margin of 0.1 (-0.42%) against gold's 1201.40 at spread margin of 1.00 (-4.70%). Also, if we look at the metals separately, silver has a far extensive application than gold. And you can't deny the fact that each ounce of gold is either resting in the banks or the lockers? Silver is indeed a poor man's gold. It seems safe to say that the people will allocate more resources in the white safe heavenly escape rather than the shining golden metal.

Following is the data to convince:

As per the World Silver Survey 2018, published by The Silver Institute and Thomson Reuters, India has leaped onto the 12th position among the Top 20 silver producing nations. India's contribution in the silver market has significantly gone up to16.9 million ounces as compared to 14 million ounces in 2016.

Fluctuations in the Market

The silver game is mostly a rendition of the demand-supply chase. Silver prices have recorded a range-bound fluctuation lately. It gets influenced by many global factors. However, India enjoys a vital position to determine the price being one of the top contributors to the silver market. The exchange rate also plays a pivotal role and works as a balancing factor between the Indian and global prices.

Be As Versatile As Silver

The significant boost in the industrial demand of silver lies in the fact that silver is photovoltaic and is being used extensively in solar panels. Technology is also using silver because of certain unique characteristics found exclusively in this metal. Every day, new uses of silver are discovered. The need for silver has been on a rise in forms such as bonding wire, which is currently at the nascent stage. While it has just begun, silver could potentially take market share from copper and gold within the wire industry in the next five years, if you believe in the predictions!

Chennai- A Special Focus

The silver price in Chennai is INR 44.97 per gram, at the time of writing this article. Silver is one of the most popular commodities in Chennai as it is a very good investment escape. Chennai leads the list when it comes to silver investment in India. Silver is not only an imported product in Chennai but also used mainly for industrial as well as trading purpose.

Ways to Invest in Silver:

  • Bullions - The most popular form of investment is bullions. You can buy quantities of the metal outright and keep it simple.
  • Silver Futures and Options - Invest in the movement of the silver market. Stay active and mint money through the riding of the market prices.
  • Silver ETFs - ETFs are funds traded on a stock exchange. They are comprised of bundled third-party assets, and your value comes from how those underlying assets perform.
  • Silver Production Stocks and funds- Through stocks and mutual funds, one can invest in silver mining companies and firms that deal in production, distribution, and use of silver.

Thumb Rules for an Ideal Investment

  • Choose silver coins for small-scale investments - If you are a salaried man, then you save some money every month as per your capacity. You can do the same with the silver coins and sell them at a later stage when you wish to liquidate your investments.
    Another plus point is the ready availability of these coins in the banks. You can also grab them from a reputed well-known jeweler with a certificate about its purity.
    Remember, the banks will only sell silver coins and not take them back. You'll have to approach local jewelers to sell them at a later stage.
  • Choose Silver Bars for huge investments -Silver bars have a huge demand in the market and are preferred over coins for large-scale investments.
  • Make optimum use of online commodity market -If you aren't keen on physical silver considering it's bulky, you can look for silver in the commodity market. The investment needed here might require more inputs from you in the form of paying a certain percentage of the entire contract value
    Just a word of warning, it is highly speculative and cannot be classified as a pure form of investment. However, you will be able to leverage your position when you invest wisely. The rule persists.
  • Always buy from reputed dealers - It is always a good idea to buy from trusted sources to not get robbed. You might get cheated if you give in to attractive luring offers by local vendors. Do ask for the certificate of purity and ascertain it necessarily.
  • Secure them safely with bank lockers -Keep your investment in safe custody, away from the paranoid threat of theft and burglary.
  • Track Prices from different sources - The rates keep on fluctuating with a curve resonating the heartbeat. For this reason, prevailing silver prices must be constantly checked and you must not get fooled by anybody around. This will be handy during your purchase and will convey the idea of you being vigilant and well-informed, thus reducing chances of getting fooled.
  • Try not to buy everything in one go -You can't predict the trends of the given product, and hence it is safer to buy in installments. You'll be able to get an average price and allocate your money-in-hand smartly.
  • Do not hesitate to sell when prices are high - Be practical and sell-it-off for higher returns. You can repurchase them at a later stage when the prices fall. This implies that you will keep making money in the process. A game of high and low!
  • Always save reserve cash for good deals -If you are planning to invest a few lakhs into this commodity, make sure to have at least 20% cash reserves for emergencies.
  • Keep track of global financial markets -Be aware of all happenings, calculate risks, and plan accordingly.

Some Disadvantages

  • It's a little expensive, considering the cost of shipping and storing. Also, the labor charges get added. Not to forget, the cost of insurance.
  • Possibility of theft- When you buy physical silver, there is a chance that it gets stolen or misplaced. Be careful!
  • It takes up valuable storage space - Granted, this might not be as such a problem but to remind and organize your thinking.

Summing it Up:

The bottom line is that the investment in precious metal is known to come with some inherent risks and is advised only for investors who don’t mind taking risks. As a prudent measure, it is always recommended to keep the exposure to this asset class limited to 10 percent of the overall investment portfolio.


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