FOCUS-Indians scramble for silver as prices slump

By Ruchira Singh

MUMBAI, Oct 20 (Reuters) - Indian traders may not be buying much gold with prices close to all-time highs, but are scrambling to stock up on silver that fell to its lowest in a little more than a year, dealers said.

"There is already a shift from gold to silver... people are very comfortable with silver prices," said Ajay Singh of Kiran Jewellers, a wholesaler in Jaipur.

Singh said his silver sales had risen five-fold from the same period last year, ahead of key festivals, Dhanteras and Diwali, next week. On the continuation charts of the Multi Commodity Exchange of India Ltd (MCX), silver futures MSVc1 were at 17,541 rupees per kg, close to a 13-month low struck late on Friday at 16,857 rupees.

The current price is down 36 percent from its record high at 27,500 rupees on March 17.

Suresh Hundia, president of Bombay Bullion Association, said silver imports had accelerated since August, and demand was heavy early this month, when prices were in the range of 19,000 rupees and 20,000 rupees.

"Earlier in the year, there was hardly any demand but now since August, about 250 tonnes is being imported every month," Hundia said.

Yet, imports stood around 800 tonnes so far this year as against around 2,280 tonnes in all of last year, he added.

SUPPLIES UNSTEADY

Many traders said silver imports hit bottlenecks even at high premiums, with a global demand resurgence, difficult credit market and logistical woes. "Many banks are unable to get silver even if we tell them we will give them the full sum of money for the consignment," said Daman Prakash, director of MNC Bullion Pvt Ltd, a wholesaler in Chennai.

"There is shortage of space in flights and that is curbing the supplies," said Prithviraj Kothari, director at Riddisiddhi Bullions Ltd.

A prominent Geneva-based supplier, Afshin Nabavi, senior vice president at MKS Finance S.A., said supplies were "starting to get tough."

"There is a huge demand for silver... it has not been this cheap for a while now," Nabavi said.

Banks are ill prepared for the resurgence in demand and at least one large bank has chosen not to sell silver this year, traders said.

"Earlier this year banks were stuck with stocks and some had to think about re-exporting it," said Kiran Jewellers' Singh.

"Now they are not being able to arrange supplies.. whoever reaches them first or those who have good contacts are getting the little silver that is coming in."

Silver was being imported at a premium of 35 cents as against 10 cents in normal times, dealers said.

Demand for the white metal could intensify if prices fell further, said Nayan Pansare, an analyst.

"At 15,000-16,000 rupees we could see a bigger rush for silver and more switches from gold to silver," Pansare said.

(Editing by Prem Udayabhanu)