Credit: Maxpixels

Being the largest consumer of gold and the fourth-largest consumer of silver, India 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 the Indian market and influences the price movements of gold and silver.

According to the experts, silver prices in India increased by about 11.4 % on average between early September and early December. The statistics also reveal that November, January, February and May are the best months to expect solid gains 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 an agriculture-oriented country and almost 70 % of gold and silver is bought by rural farmers, it is evident that the monsoon is the decisive factor.

Here is an example that elaborates the statement: Agriculture in India highly depends on Monsoon. Too little or too much 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 good financial benefits, the farmers in India start parking their money in precious metals. People or farmers from rural India buy precious metals because rural communities in India hold very high significance for precious metals like silver and gold. As a tradition, many farmers buy silver or gold blocks and bury them at a not-so prominent spot on their farm as an offering or a prayer for a good harvest. Also, it is observed that rural people of India trust their jewellers more than banks!

The monsoon season in 2010 was quite healthy, and that resulted in record grain production. The year 2010-11 estimated 241.56 million tons of food grain production, more by 5.4 % than that of the previous season.

But now, as gold prices are shooting higher and higher, most farmers or people from India have started buying silver coins, silver jewellery 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 in India’s rural communities demanding silver more strongly as a way of investments.