Silver Prices Surge Ahead of Budget: Premiums Hit Record Highs

Silver prices in India are witnessing a sharp rally, trading at steep premiums amid rising demand and looming expectations of an import duty hike in the upcoming Union Budget. The market is buzzing as import numbers climb and premiums soar, marking a significant moment for bullion traders and jewellers alike.

Market Performance: Silver on a Tearaway Rally

Over the past several months, silver has experienced unprecedented gains. With demand picking up steadily, India’s reliance on imports has grown, pushing prices higher.

• December imports: $0.76 billion, up 79.7% month-on-month
• April–December period: $7.77 billion, a 129% jump year-on-year compared to $3.39 billion last year

This surge in imports comes even after the festive season, traditionally the peak period for silver shipments, highlighting the ongoing demand pressures in the market.

Import Duties and Landed Cost

In the previous Union Budget, the Finance Ministry had slashed silver import duty to 6% from 12%, aiming to curb smuggling and promote domestic trading. Along with the 3% GST, this formed the basis of silver’s landed price — the total cost of silver for buyers and traders.

However, with demand rising sharply, market participants have been witnessing premiums well above the standard landed cost.

Premiums on Silver Trading

On January 21, silver futures on the MCX were trading at premiums exceeding Rs 40,000 per kilogram over the landed cost. This extraordinary premium highlights the intensity of the rally and the anticipation of policy changes in the upcoming Budget.

Key points on current premiums:

• Silver futures at MCX: Rs 3,39,927 per kg
• Premiums over landed cost: ~Rs 40,000 per kg

The sharp dislocation between spot prices and futures has put pressure on working capital for jewellers, as maintaining physical inventory becomes more challenging when premiums spike.

Industry Reactions and Policy Focus

The rising premiums have caught attention across the sector, prompting industry bodies to seek clarification from government authorities on pricing and import regulations.

While silver faces potential import duty revisions, gold import duties are expected to remain largely unchanged. The government’s focus appears to be on domestic refining and supporting local gold supply, rather than altering customs duties for consumers.

Summary

Silver’s recent rally is a combination of soaring demand, rising imports, and anticipations of policy changes in the Union Budget. With imports for April–December reaching $7.77 billion, up 129% from last year, premiums on MCX have surged to record highs of Rs 3,39,927 per kg.

The coming Budget will play a crucial role in determining whether these gains continue or plateau. For now, silver remains in the spotlight, with traders and jewellers navigating the steep premiums and adjusting their inventories accordingly.

Source: Moneycontrol