Given the high price of gold and the Indian government's new regulation on buying gold and tax deductions at source, the sale of silver items at jewellery shops soared to a new high.
"Silver has proved to be the preferred substitute with most retail buyers this Diwali,'' said Manish Mehta of bullion retailer, D P Zaveri and Sons. ``Customers came in asking for silver coins, corporate gifting products, small utensils to be used at home and for silver items to conduct puja (the ceremony for prayers),'' he added.
Stating that several customers asked for gold items too, given the auspicious festival when people swarm the market to purchase jewellery, coins and bars and seek blessings for wealth and success, Mehta said gold's high price drove many customers to the white metal.
"We had several customers who came in for exquisite silverware and silver articles, which will be handed down to the next generation,'' he said.
Indian consumers are also looking to the investment potential of silver, given the fact that prices are set to gain traction. In 2011, silver recorded an average $35.22 per ounce annual price, double the $14.66 per ounce seen in 2009. Though silver touched $50 per ounce on 28 April 2011, retailers say the current price in the international market, at $32.67 an ounce on Thursday morning, is no indicator of its potential.
"Gold prices have reached an all time high in 2012, given the weak Indian rupee. But, silver prices have not surpassed their April 2011 record. Silver priced in rupees has been quoted around 20% lower,'' said Keshav Pendharkar, bullion retailer.
He added that, in September, silver futures contract volume traded on India's largest commodity exchange, the Multi Commodity Exchange, rose 30% as compared to July's numbers. At the same time, gold futures volume declined 10%.
Bullion retailers said that investors are looking for good returns for silver and have held on to their purchases in anticipation of rising prices over the next three to six months.
"Silver has outperformed gold in the last two months with over 20% returns. The metal fell to $976.67 (Rs 53,500) a kilo and recovered later to $1,168.36 (Rs 64,000) a kilo. Against that, gold has offered just 5% returns in the same period. Investors are keen to grab a share in the white metal,'' said Rahul Mehta of Silver Emporium, bullion retailer.
Tracking a firm global trend, silver futures prices on November 15, moved up by 0.58% to $1,115.91 (Rs 61,159) per kilo in the Mumbai market.
At the Multi Commodity Exchange, silver for delivery in December also rose by 0.58%. Similarly, the metal for delivery in March gained 0.49%.
Analysts said increased buying by speculators and a firm global trend has pushed up silver prices at futures trade.
"Last year, the price of silver had gone up steeply around the festival time and people were not too confident about investing. This year, the price has remained more or less steady throughout giving people fresh momentum,'' said Mehta.
On Dhanteras (Sunday), the silver rate touched an intraday high of $1,176.94 (Rs 64,502) per kilo in the Mumbai market, a new high.