Indian investors have more significant opportunities to invest in silver beyond holding the precious metal physically as new investment products have been introduced, a Silver Institute’s Market Trend report has said.
Traditionally, Indians have favoured holding silver physically but the “Trend in Indian Investment Demand” study revealed that since 2014, some notable policy and regulatory changes in India have structurally altered investment in precious metals, potentially limiting physical investment.
The introduction of new options, including silver exchange-traded products (ETPs) and digital silver, has provided opportunities for Indian investors to invest in liquid assets, without the need to worry about the storage of physical silver, it said.
The study said India plays a significant role in silver and gold investment demand as the world’s sixth-largest economy and foremost silver fabricator.
90% of 2022 mine output
Precious metals are historically recognised in the market as savings and investment assets, but the demand for physical holding is a reflection of the low penetration of banking and other financial products, it said.
“Today, with new investment products available, India’s role in silver investment has the potential to grow,” the study said.
Since 2010, India’s physical silver investment (bars and coins) has accounted for one-third of the overall silver demand in the country. During this time, Indian retail investors bought around 730 million ounces (Moz) of silver, representing 90 per cent of global silver mine production in 2022.
Policy and regulatory changes include the Government’s push to provide banking services and the crackdown on tax evasion and cash transactions. “These changes, however, have served to spur new options for investing in silver,” it said.
Today, investors can choose among seven ETPs and five silver ETP Fund-of-Funds (FoFs). “As of end 2022, silver ETP holdings in India stood at an estimated 8 million ounces, a good start given the fact that these products were only released in late 2021,” the report said.
‘Digital silver,’ which allows inventors to purchase silver at a low price point, is another new investment instrument. This allows the silver to be stored in insured values by the seller on behalf of the investor, who has the option of either selling it back on the same platform or taking physical delivery as coins or bars.
Availing of physical delivery entails delivery and minting charges but digital silver is representing a new chapter for silver investment. Nine companies offer these products, the study said.
Another potential area
Another potentially new area for investment in silver is futures on the India International Bullion Exchange (IIBX), which launched the trade in August last year.
Though IIBX allows jewellers and dealers to import gold through the exchange through spot contracts by trading in bullion depository receipts, industry officials expect the facility to be extended to silver, the study said.
These investments will likely increase as the awareness among investors increases but Indians may still favour holding physical assets in the form of bars, coins, and jewellery.
Referring to data from the Silver Institute, the study said Indian physical investment surged to 79.4 Moz, a seven-year high. The country witnessed a record high for imports of silver, which soared to 304 Moz.