India, being the largest consumer of gold and fourth largest consumer of silver highly influences the trade of precious metals. Winter is the season full of festivals and festivals in India are closely related to buying precious metals. Hence, the winter triggers the transactions of precious metals in Indian market and influences the price movements of gold and silver.
According to the experts, during the time between early September to early December, silver prices in India increase by about 11.4 percent on average. The statistics also reveal that November, January, February and May are the best months during which solid gains can be expected out of silver investments.
Monsoon and Precious Metals Trade in India
In addition to the factor mentioned above, monsoon also plays a key role in deciding precious metals’ prices. Considering that India is agriculture oriented country and almost 70 percent of gold and silver is bought by rural farmers, it is evident that monsoon is the decider factor.
Here is an example that elaborates the statement: Agriculture in India highly depends on Monsoon. Too less or too much of a rainfall indicates loss of agricultural output and finally the financial benefit. But good enough rainfall assures a healthy agricultural output and financial benefits. Hence, when the monsoon comes with good rainfall and when there are good financial benefits, the farmers in India start parking their money in precious metals. Another reason why people or farmers from rural India buy precious metals is that rural communities in India hold very high significance for precious metals like silver and gold. Also, as a tradition, many farmers buy silver or gold blocks and bury them at not-so prominent spot in their farm as an offering or a prayer for a good harvest. Also, it is observed that rural people of India trust their jewelers more than banks!
The monsoon season in 2010 was quite healthy and that resulted in record grain production. Year 2010-11 estimated 241.56 million tons of food grain production, more by 5.4 percent than that of the previous season.
But now, as prices on gold are shooting higher and higher, the majority of farmers or people from India have started buying silver coins, silver jewelry and silver bars as an alternative.
Now, it’s time to wait and watch if the winter of 2011 and healthy crop season of this year results into India’s rural communities demanding for silver more strongly as a way of investments.