MUMBAI (Reuters) - MMTC, India’s largest bullion importer, will almost double its silver purchases this fiscal year to 1,500 tonnes despite soaring prices as buying continues from investors expecting stronger returns than gold, director Ved Prakash told Reuters.
“Silver imports are better than last year. Gold would move in tandem,” said Prakash, adding “price is no more an obstacle, they are all buying in expectation of a further rise.”
Prakash said buyers were eyeing 100,000 rupees (around $2,250) per kilo for silver — which would be a record high — with current domestic prices around 71,000 rupees. The Bombay Bullion Association has said silver could hit 100,000 rupees this year.
“A lot of demand is coming because of the reports of about 100,000 rupees. As silver is relatively cheaper (than gold) to buy, you don’t need much money, it’s with that point of view that everyone is scrambling for silver,” said Prakash.
International silver prices surged more than five percent on Monday, moving closer to their 1980 all-time peak buoyed by a weaker dollar and strong physical demand in Asia.
Spot silver was heading for its biggest daily gain in five months, hitting a 31-year high of $49.31 an ounce. It was trading at $48.44 an ounce on Monday.
Silver prices have jumped nearly 60 percent this year, after jumping over 80 percent in 2010, with returns for the metal — which also has industrial uses — better than more expensive gold.
“Consumers normally buy silver on dhanteras and (other) festivals. Now they want to buy through the year,” said Prakash. “This is what the hype is (on) silver. I don’t know how far it will stand and for how long.”
MMTC increased silver imports 20 percent to 360 tonnes in the January to April period — slower than the pace of gold purchases, where it has imported 90 tonnes so far in 2011 — up 38 percent on year.
MMTC is likely to increase shipments of gold in the year to March 2012 by eight percent to 265 tonnes.
Spot gold extended its rise on Monday to hit a record high for a seventh consecutive session at $1,518.10 an ounce, before easing to $1,517.60.
Prakash expects gold price rises to be capped while silver prices are likely to hit $60 an ounce by the end of June.
“Prices (of gold) should firm up this year and I don’t expect them to go up very much,” said Prakash.
The state-run company has offered discounts 0.2-2 percent on gold and 5-10 percent on silver wares for the upcoming Akshaya Tritiya on May 6. Indian companies traditionally make special offers to customers around festivals to pump up buying.
Akshaya Tritiya is India’s second-biggest gold buying festival after Dhanteras.
Editing by Jo Winterbottom