India drags global demand for silver in 2023 with lower jewellery, silverware offtake

Global demand for silver will likely decline 10 per cent in 2023 with offtake of silver jewellery and silverware declining by 22 per cent and 47 per cent, respectively, with India being the prime factor behind the dip.

Key findings reported by Philip Newman, Managing Director at Metals Focus, and Sarah Tomlinson, Director of Mine Supply, during the Silver Institute’s Annual Silver Industry Dinner showed that globally, total silver demand is forecast to ease by 10 per cent to 1.14 billion ounces in 2023. 

Industrial use gains

Gains in industrial applications will be offset by losses in all other key segments. Global jewellery demand is expected to edge slightly higher in 2023, while silverware will fall by a notably smaller 12 per cent in view of the setback in India, the findings said.

Physical investment in 2023 is projected to fall by 21 per cent to a three-year low of 263 million ounces. While most markets have seen weaker volumes, losses have been concentrated in India and Germany. 

“In India, record high local prices both deterred new investor purchases and led to profit taking, resulting in a 46 per cent decline,” the findings said. 

Role of $, ₹

“The demand for silver jewellery has been down, primarily owing to  various economic factors, including the geo-political situation, the fluctuation of dollar against the rupee, and implications of the downtrend in the Chinese economy as the country struggles to come out of the pandemic,” said Colin Shah, MD, Kama Jewelry. 

“This has led to a freefall of 55 per cent from April to November 2023 in silver exports, thus leaving a massive dent in the overall demand-supply dynamics of the white metal. This led to multiple instances where the silver price plummeted,” he said.

Hareesh V, Head of Commodities at Geojit Financial Services, said silver prices throughout this year traded higher and posted a record high in December. 

“Usually, the demand for jewellery in the country peaks during the key festive and wedding season which starts in October. This year during this period prices of silver were comparatively higher than in previous years,” he said.

Higher than 2022

 Since March, domestic prices have been congested inside ₹78,000-66,000 a kg level, denting purchases from rural areas from where silver in the form of jewellery is mostly consumed.

Silver prices on an average were much higher than last year in 2023 and even the bottom prices of silver were significantly higher compared with 2022. 

“The demand for silverware and silver jewellery has always been price elastic which is why we have seen that in the years when silver prices are lower, we usually see robust demand but when silver prices are higher, we see lower demand, said Amit Goel, Co-Founder and Chief Global Strategist at Pace 360 said.

On lower investments, Harish said higher prices and increased investment opportunities in other asset classes such as equities, currencies, and gold reduced the appeal of the white precious metal. “Also, nowadays, silver being largely considered an industrial commodity rather than an investment asset affected investor sentiments,” he said.

Worst over?

Goel said: “We have seen that when the prices are low, investors tend to invest more in silver and when the prices are high they tend to invest less. This year prices were high compared with 2022 on average. Hence investors’ demand has been lower.”

 Shah said the worst is now over for silver. Multiple indicators such as the probable ceasefire between the countries in conflict and the favourable growth and inflation estimates by the US Fed are expected to emanate into a rise in overall consumption of commodities, including silver. 

“We foresee a strong comeback in demand in both international and domestic markets,” he said.

Harish said international prices are likely to soften further due to demand worries. “It is unlikely to see major rallies unless a sharp recovery in China’s industrial demand or any unforeseen geopolitical tensions. At the same time, domestic prices are likely to hold firm due to the depreciating rupee,” he said.

Deficit to dip

Goel said the silver deficit will likely come down in 2024 as its prices  are expected to go up, which would mean that the demand for silverware and silver jewellery will decline. 

“Investor demand probably will not come down because the macro conditions in 2024 are going to be much more favourable for silver than they have been this year. But we do believe that the silver deficit, which was at about 143 million ounces in the year 2023, is going to go down to about 110-120 million ounces in the year 2024,” he said.

Goel said silver prices could go up by about 10-15 per cent in 2024, though silver may tend to underperform compared to gold. The gold-silver ratio will probably move up and that is because gold will probably go up by 20 per cent at the same time  

“That being said, silver is expected to do well as it is still in deficit. The deficit in silver has come down from 253 million ounces to about 140 million ounces. This will support prices on the way down and since next year seems to be bullish for precious metals,  silver is also going to go up along with gold,” the Pace 360 Co-founder and chief global strategist said.

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