What Will Drive Silver Prices Higher In 2014

silver barsDiane Alter: While silver demand among U.S. traders at the moment is muted, silver demand in India – the world’s biggest buyer of the white metal – is insatiable.

It will be one of the biggest factors supporting higher silver prices (NYSEARCA:SLV) in 2014.

And it all stems from a move the government made to limit gold buying…

India – the world’s biggest gold buyer – imposed heavy import duties on the yellow metal this year to try and narrow India’s swollen trade gap. The government raised the import duty on gold three times this year to 10%.

In July, the government told importers that one-fifth of their purchases would have to be turned around for export. Only 80% would be available for domestic use.

As these import numbers show, silver has become the “go-to” precious metal for India’s investors.

India Driving Silver Higher in 2014

Data released early last week showed Indian silver imports are set to hit a record this year.

According to metals consultancy firm GFMS, India imported 4,073 tons of silver from January to August. That was more than double the 1,921 tons in all of 2012, when a spike in prices during the peak season pressured demand. The record high was set in 2008 when India imported 5,048 tons.

“Ever since the government has started putting measures to curb gold imports, demand for silver has seen a sudden surge,” Monal Thakkar, president of Amrapali Industries, a leading Ahmedabad-based stock and commodity brokerage house, told the Business Standard. “Moreover, there is a general scare in the market that the government might soon start curbing silver imports also, as a result, traders are stocking up silver.”

But the fresh spike in silver buying is unlikely to result in a similar policy response from authorities since the value of imported silver is much lower than gold and is not critical to the country’s trade balance.

Industry experts expect demand for silver to remain high in India as long as gold prices and import taxes stay elevated.

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