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Silver to touch Rs 31,250 soon: Industry body

business Updated: Nov 20, 2009 14:45 IST

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Silver is likely to become expensive in the coming days globally, as investors have gone gung-ho over the white metal in the last two months, according to a latest report by an industry body.

"Investment has surged this year and is expected to drive silver prices higher, with the $ 20-per ounce level likely to be breached in the short-term," global precious metals consultancy GFMS Ltd said today. In rupee terms, silver would cost about Rs 31,250 a kg in the coming days, it added.

At present, silver prices are ruling at $ 18.57 per ounce at the London Metal Exchange, while it is quoting Rs 28,700 per kg in the local market.

"Since September, there has been a robust expansion in investors' long positions in all investment arenas" as white metal has benefited from gold's strength and weaker US dollar, GFMS noted.

The early part of 2009 was dominated by demand for physical metal and ETFs ((exchange traded funds), as investors sought refuge in silver when fears over counter-party risks and the financial system remained rampant, it said.

Globally, the January-October period saw a 3,110 tonne rise in ETF holdings, while there was an increase of 5,306 tonne in investors' net long positions in Comex futures, the report said.

Besides, investors' bullion stocks have also increased substantially so far this year on a net basis, it added.

Investment in the white metal is rising, as some investors are concerned about higher inflation in future and the general growth in investors' interest in commodities in a very low interest rate environment, GFMS observed.

"Investment demand including coins is currently projected to exceed a net of 6,440 tonne this year," it said, adding demand from industries for fabrication and photographic use is expected to drop significantly this year.

However, conditions should eventually become less supportive for investment demand in silver during the course of next year as the economy gradually recovers, short-term interest rates rise and the US dollar stabilises, it pointed out.