Severe shortage of silver in the spot market, along with a premium of Rs 30,000/kg has forced jewellers to stop accepting fresh orders in Mumbai’s Zaveri Bazar.
Said Rajesh Rokde, chairman All India Gem and Jewellery Domestic Council, “The surge in the premium is primarily due to increased investment and industrial demand, both locally and globally. This has forced jewellers to stop fresh orders for ornaments and bullion.”
In the afternoon, silver deals in the Zaveri Bazar were happening at levels of over Rs 1,90,000/kg. Some reports said that it had even crossed 2 lakh/kg at one point. However, silver prices moderated to Rs 1,74,000/ kg compared to Rs 1,78.100/kg yesterday in Zaveri Bazar while at MCX, silver was trading at Rs1,75,109.
Such high prices, especially during the festive season including Diwali and Dhanteras, has dampened the spirits of jewellers and buyers alike.
Traders said that there is strong demand globally as well from countries Australia, Turkey, and China that is exacerbating the shortage. “Chinese EV battery makers are said to be storing silver – a key material for battery making,” said one trader.
Surendra Mehta, national secretary of Indian Bullion and Jewellery Association (IBJA) added that they are expecting silver premium for spot delivery moderating from $3 per ounce to $1 in next few days which should ease pressure in the market.
To address the issue, IBJA has written to the Securities and Exchange Board of India (Sebi) to allow fund houses, who have silver exchange traded funds (ETFs), to sell part of their 3,000 tonne holding in the spot market and buy in the futures. This will help ease the spot premiums and cool down prices well. It has also said that if even 10% of the funds’ holdings are released in the spot market, it will help bring down prices without any loss to existing investors.
In the past few days six fund houses – ICICI Prudential AMC Axis Mutual Fund, Kotak Mutual Fund, UTI Mutual Fund, Tata Mutual Fund, and SBI Mutual Fund – discontinued new investments into their silver ETF FoFs. All existing SIP and STP registered shall remain operational.
A silver ETF must invest at least 95% of its assets in silver and silver-related instruments like exchange-traded commodity derivatives (ETCDs), but it is restricted to using a maximum of 10% of its assets in the latter. ETCDs allow funds to have exposure to silver without physically holding it.
Even gold has been trading at a premium, but it is more moderate at Rs 5,000. However, it is quoting at a high of Rs 1,32,000/10gm. The official spot market closing price, according to IBJA, was lower Rs1,26,714, up by Rs 540 than yesterday. In the international spot market, gold was trading at $4,217 per ounce in the afternoon before moderating to $4,186 per ounce.