Indian Investors Switch to Silver From Gold

Increasing marginal demand for physical silver is straining paper control. Paper shuffling can 'handle' only so much demand before a well-defined, two-tiered market (one for physical and another for paper) emerges. Investor confidence that the paper price close approximates that of physical is the basis of control. If that confidence is broken in either silver or gold, all hell breaks loose.

Higher returns are tempting many small Indian investors to buy silver and sell some of their gold jewelry as the price of the white metal has more than doubled over the past year, traders said.

Spot silver prices rose to an all-time high of 60,125 rupees ($1364) a kilogram Friday in India's main bullion hub, Mumbai, from 28,535 rupees on April 12 last year, driven by firm global cues as concerns over unrest in the Middle East and North Africa have improved its safe-haven appeal. Gold prices too rose, but at a much slower pace of about 21% to 21,500 rupees per 10 grams.

Source: online.wsj.com