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The price of silver has reached the historical level of Rs 191800 per kg for the first time in the domestic futures market. In two days, the price of silver has increased by more than Rs 6923 and strong buying by investors and lack of supply has further fueled this rise. The market is also seeing a rise due to expectations of a possible rate cut by the Federal Reserve. Gold is also trading with a slight rise at Rs 130280 per 10 grams. Silver has gone above $60 in the international market and huge inflows are being seen in global ETFs.
New Delhi. There was a huge rise in silver prices for the second consecutive day and on Wednesday, the March contract in MCX rose by Rs 3736 to reach a new record of Rs 191800 per kg. In the last session also, a rise of Rs 6923 was seen, due to which the prices have gone up rapidly in two consecutive days. Heavy buying by investors in the market and lack of supply have made this surge even stronger. Gold has also increased slightly and reached Rs 130280 per 10 grams in the February contract. In the international market, gold was around $ 4234.3 per ounce on Comex, while silver crossed the historical level of $ 60 per ounce and reached $ 62.14.
Augmont’s Research Head Renisha Chainani said that silver prices have reached above Rs 191000 per kg as the market is waiting for a possible rate cut by the Federal Reserve. Experts estimate that the Fed may cut rates by 25 basis points today, although Chairman Jerome Powell may take a cautious stance on future policy.
Bulls became active
Commodities Analyst Manav Modi of Motilal Oswal Financial Services said that bulls have become active in silver again. After the last few declines, a new rise has been seen in the market. According to Modi, support to silver prices has been given by continuous low supply, decline in global inventory and possible loose policy of the Fed. Besides, the inclusion of silver in America’s Critical Minerals list has also strengthened the confidence of investors.
Great investment in ETFs
Tremendous inflows are also being seen in silver ETFs. iShares added 324 tonnes of silver last week, the largest weekly inflow since July. On the other hand, in the case of gold also, central banks around the world are continuing purchasing. China has increased its gold reserves for the 13th consecutive month to 74.12 million troy ounces.
there will be a game tonight
Experts believe that Fed Chair Powell’s statements and economic projections will decide the next direction of prices tonight. At present, the sentiment in the market is bullish and if the supply problem continues, then this record of silver may increase further in the coming days.
Federal Reserve meeting
America’s central bank, the Federal Reserve, will announce interest rates today. According to Indian time, information about interest rates will be given at 12.30 pm. Federal Reserve Chief Jerome Powell will give a speech at 1 pm. The world will be watching his speech. If interest rates fall then silver will rise. Because when rates are cut, investing money in savings or bonds becomes less profitable. Therefore traders run towards commodities. If rates are not cut, a fall in silver may also be seen.
1.99 lakh in bullion market
While the future price of silver on MCX is seen at Rs 1.91 lakh, the price of 1 kg silver in the bullion market has become Rs 1.99 lakh. Bullion market is a general market where gold, silver, platinum and other precious metals are bought in retail and wholesale. Its prices vary from MCX. It is from here that jewelers and big buyers buy metal and then make and sell jewelery in the retail market.
How are silver prices determined?
- International market rate: Silver is a global commodity, hence its basic price is decided by international markets like London, New York (Comex). The prices seen in India are the effect of these global rates.
- Strength or weakness of the dollar: Silver is traded in dollars. When the dollar strengthens, silver appears expensive and prices fall. When the dollar weakens, silver prices go up.
- Balance of supply and demand: If the production of silver in the world is less and the demand is high then the prices go up rapidly. In recent times, mining output has decreased and industrial demand has increased, due to which prices are rising.
- Industrial Use: Silver is not only used in jewellery, but in many industries including solar panels, batteries, electronics, medical devices. When there is a boom in these sectors, the demand for silver increases and the prices increase.
- Inflation and interest rates: When inflation increases, people invest money in safe assets like gold and silver, the prices go up. Even if Fed or RBI cuts rates, silver and gold rise because investors consider them ‘safe haven’.
- Buying by investors (ETFs and futures): If big investors or ETFs start buying silver in large quantities, demand suddenly increases in the market and prices set records.
- Geopolitical tensions and economic uncertainty: As soon as tensions rise in the world, investors rush into safe assets. Due to this, both silver and gold fly.
- Policies of governments and central banks: Things like taxes, import duties, trade rules and reserve management also move prices up and down.
How does the price reach you?
- First of all, the base price of silver is decided in the international market. The price of silver on global exchanges like Comex is fixed in dollars. In India, the same rate is multiplied by the dollar-rupee exchange rate and forms the basic price. If the dollar is expensive then silver automatically starts looking expensive in India.
- After this, import duty, cess and GST play the biggest role in increasing the price. Since India imports almost all its silver requirement from outside, the taxes imposed on imports are directly added to the price. This is the reason why there is a big difference between the international price and the Indian price.
- MCX plays the third important role in determining the price of silver. In India, future trading of silver takes place on Multi Commodity Exchange (MCX), and this is considered as the benchmark price of the domestic market. If buying increases on MCX, the rate goes up and if selling increases, the price immediately falls. The prices shown on news channels and mobile apps are mostly based on MCX futures contracts.
- After this complete calculation, the effect of local market is also added. Be it wedding season or festival, many times the demand suddenly increases. Supply falls short in some cities. In such a situation, different rates may be seen in cities like Delhi, Mumbai, Jaipur and Ahmedabad.
- Finally, when the customer reaches the jewelery shop, the jeweler’s margin and making charges are also added to the price shown there. This is the reason why the shop’s rate is always higher than the rate shown on the app or in the news.
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