Madhurendra Sinha
GOLD prices crossed Rs 80,000 per 10 grams on Diwali day, but what shocked bullion dealers was the extraordinary spurt in silver prices. The white metal touched Rs 1,02,500 on November 1, although it retreated the next day. In a prelude to this drama, on October 27, gold prices peaked at Rs 78,387, a record high according to MCX data. Prices in the gold spot market have also increased since the start of the year. In fact, yearon-year gold prices have soared by about 30 per cent.
As India no longer produces gold, it necessitates import of hundreds of tonnes of gold each year. Consequently, prices of the yellow metal are determined by international events and supply. The global economy and the strength of the US dollar also impact gold prices.
Safe investment
Gold has always been regarded as a safe investment in times of crises. During wars or natural calamities, gold prices typically rise as it offers a form of security to investors. With two significant wars going on – the Israel-Hamas conflict and the war between Russia and Ukraine – normal trade has been disrupted worldwide, resulting in drastic increase in bullion prices.
“The price of gold is heading north due to international factors,” says Yogesh Singhal, Chairman of All Bullion Jewellers Association. He said gold prices are now unpredictable as they are driven by international factors, “beyond our control.” “It’s the white metal, which is showing its true colours,” says Sushil Jain, General Secretary of Bullion Traders Kucha Mahajani, Delhi’s largest bullion market. The price of silver per kilogram in 2017 was Rs 37,825, he said, which surged to more than Rs 40,000 in 2020, but now it exceeds one lakh.
Contributing factors
Talking of factors contributing to this, Jain said industrial demand for silver has increased manifold since the introduction of electric vehicles, as it is used in batteries. Additionally, the metal is utilised in the manufacture of smartphones, tablets, photovoltaic cells and medical instruments etc. due to its excellent conductivity.
Interestingly, silver is also used in sweets and gutkhas, further increasing its demand and price. Another expert indicated that the rise in silver prices has dampened the spirits of retail buyers, who are now purchasing less than before. Even during the Diwali festival, he said, buyers who used to purchase dozens of silver coins refrained from doing so this year.
