<p>Silver imports into India rose sharply last month, hitting the highest January level since Metals Focus began tracking the data in 2008.</p>
<p>Silver imports rose by 37 percent year on year to 875 tonnes.</p>
<p>This jump in imports happened despite higher prices.</p>
<h2>Hot Indian Silver Investment Demand</h2>
<p>According to Metals Focus, continued strength in investment offtake is fueling Indian silver demand.</p>
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<p>Analysts say Indian investors anticipate a price rebound in silver due to it lagging during an impressive rally that drove gold prices to new records in rupee terms last month.</p>
<p>This is reflected in a <a href="https://www.moneymetals.com/news/2024/03/25/what-is-the-gold-silver-ratio-why-should-we-pay-attention-to-it-003075">gold-silver ratio</a> that has climbed to over 91-1.</p>
<p>The gold-silver ratio tells you how many ounces of silver it takes to buy one ounce of gold given the current spot price of both metals. While industrial demand has a much bigger impact on the price of silver than gold, silver is still fundamentally a monetary metal, and its price tends to track with gold over time. The gold-silver ratio reflects this relationship.</p>
<p>In the modern era, the gold-silver ratio has averaged between 40-1 and 60-1. The current ratio running so much wider than that historical spread indicates that silver is underpriced and is a bargain compared to gold.</p>
<p>As with most averages, the gold-silver ratio tends to eventually return to the mean when it gets significantly out of whack. Over the last few decades, this snap-back has tended to happen very quickly. </p>
<p>Silver demand has been strong in India since last summer when the government <a href="https://www.moneymetals.com/news/2024/07/23/india-slashes-import-tax-on-gold-and-silver-003332">slashed taxes on gold and silver imports by more than half</a>. This triggered a significant silver price correction in the domestic market.</p>
<p>The silver price began climbing again last fall. In October, silver surpassed the key psychological level of ₹100,000/kg. However, according to Metals Focus, the import duty cut restored confidence in the market and investors to continue to buy aggressively into any price dip.</p>
<p>Improving rural consumption has also boosted Indian silver demand. According to Metals Focus, rebounding silver sales in the countryside reflect a general improvement in the rural Indian economy. Rural silver consumption accounts for around two-thirds of total Indian demand.</p>
<p>Along with robust demand for silver bars and coins, we can see Indian investment interest in silver reflected in silver-backed ETFs. Around 800 tons of metal flowed into Indian-based funds last year. They added another 114 tons of silver in January.</p>
<p><img src="https://www.moneymetals.com/uploads/content/india-silver-etf-feb-2025.png" width="581" height="399" alt="" style="display: block; margin-left: auto; margin-right: auto;" /></p>
<p>According to Metals Focus, “<em>The strength of this demand has helped keep domestic silver prices at a premium to the landed cost, with an average premium of $0.2/oz last month. This contrasts sharply with gold, which has remained in a persistent discount in India.</em>”</p>
<h2>Higher Prices Creating Headwinds for Jewelry and Silverware</h2>
<p>Higher silver prices have started to drag on the demand for jewelry and silverware in India.</p>
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<p>Higher gold prices have also indirectly impacted the silver jewelry market, causing foot traffic in jewelry stores to drop.</p>
<p>According to Metals Focus, “<em>Some seasonal support could emerge with the upcoming wedding season (from March to May), it is unlikely to fully offset the price-related decline in demand. It is also worth noting that silverware is mostly bought as a gift, and so high prices tend to encourage a shift towards lighter pieces</em>.”</p>
<p>Metals Focus expects silver demand in India to remain robust, despite headwinds from higher prices that will likely continue to put a drag on jewelry and silverware sales and incentivize some profit-taking in the investment space.</p>
<p>We tend to associate India with gold, but Indians also have a love affair with silver. Over the last decade, investors have accumulated over 17,500 tons of silver in the form of coins and bars.</p>
<p>Many analysts thought rising prices would motivate Indian investors to liquidate their extensive silver holdings. However, according to Metals Focus, selling has been “trivial,” even as the price eclipsed ₹100,000. </p>
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<p>“Our research suggests that investors are still accumulating physical silver to participate in the bull run. This is primarily driven by still positive price expectations.”</p>
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