Why invest in e-silver? Silver has traditionally been considered the poorer cousin of gold.
Most Indians who are dedicated investors in gold have shied away from investing in this other precious metal. But, with gold at its all-time high and silver prices still a distance away, its time to take another look at silver.
Silver is often compared to gold, but what makes it such an interesting investment is its industrial use. Largely a by-product of zinc, lead, copper and gold mines, silver has an intrinsic value because of its natural industrial demand.
While gold and silver prices have tended to follow each other over time, silver, over a
long historical period, has outperformed gold (by about a percentage point annually in
rupee prices).
That said, silver also has comparatively higher risk than gold. Infact, it can be considered a geared play on gold because silver prices outperform gold prices on the upside, and crash more quickly on the downside.
DEMAND AND SUPPLY FACTOR OF SILVER
Silver is a metal that is associated with metals such as gold, lead, zinc and copper, though its unusual properties make it very different from them. It is used in making various kinds
of jewellery as it is considered a precious metal second to gold, but its contribution in the various industrial secors as a raw material makes it unmatchable. No other metal can replace silver as it has an endless number of uses.
Silver is produced throughout the world. However, an interesting fact is that the primary source of silver is not the silver mines, but the other sources of silver. Silver mines produce a small amount of silver that is 25 percent of the world’s total production and the rest of it is derived as by product from gold mines (15 percent), copper mines(24 percent), lead and zinc mines (34 percent) and other sources. The total production of
silver in the world is around 615 million ounces and Mexico is the leading silver
producing country. The total demand of silver in the world amounts to around 29,000
tones.
The rally in silver prices has recently been driven by investment demand in the safe havens like, the still recovering US and Europe economies. In addition, industrial demand for silver for emerging markets is increasing the prices. Locally, the demand for silver is influenced by economic growth and the monsoons. Its prices, in comparison to gold, have been more sensitive to business cycle fluctuations, while gold, a store of value, has been
less sensitive.
INDIAN SILVER SCENARIO
India hardly produces any silver and is primarily a silver importing country. It holds the
20th place in the list of silver producing countries and the total production of silver in India in 2009 was around 7.3 million ounces. Over 50 percent share of import of silver in India is held by Chinese silver. In India, investors have limited ways to take exposure to silver. While gold can be invested through ETFs or in MF form, investors have no choice
but to buy silver futures. Also, jewellery has been a big source of demand for silver and,in fact, with gold prices at their current levels, more Indian jewelers are increasing the amount of silver used in jewellery.
TRADING IN E-SILVER
Unlike the past, when gold could be bought either in physical form or through gold ETFs, now one can buy and sell gold electronically. Trading in e-gold and e-silver can happen
on the terminals of any authorized dealer permitted to trade in e-gold and e-silver on your
behalf. And it is settled in T + 2 days.
OPENING OF DEMAT ACCOUNT
One needs to open a demat account for initiating any trade to buy gold or E-silver online.The demat account in the name of an individual can either be on single or joint basis and would be used by the accountholder for holding and transacting in demat units in electronic form. It can also be opened in the name of corporate, HUF, a society or a trust.
One can open this account either in NSDL Or CDSL. A depository account is a demat account opened by a trading-cum clearing member or any other clearing member of the Exchange. This account is maintained by the member to receive and deliver demated units from/to the exchange against obligation of the clients operating through such member. A pool account is required to be opened by the broker in both depositories for receiving and giving deliveries to the exchange.
E-SILVER BUYING AND SELLING MECHANISMBuying. Investing in e-gold and e-silver is as simple as buying equity shares. Clients desirous of buying any quantity of gold or silver need to transfer sufficient money to their respective broker before placing the order to buy. One needs to call the broker and place the order. After order execution, gold/silver is transferred to clients demat account in T+2
days (e.g., if you buy on Monday, you get the delivery on T + 2 days, i.e., Wednesday in your demat account)
Selling. If a client wishes to sell his holdings, he should transfer it to brokers designated account. After a successful transfer of holdings to the brokers account, he would need to call the broker and place the sell order. After the order execution, funds are transferred to the clients trading account in T+2 days.
PAY-IN AND PAY-OUT DAY
When a client having demat holding in his beneficiary account wants to sell, he can approach any member of NSEL and, accordingly, transfer the bullion to the members pool account on or before the pay-in dead-line. On receipt of the same in pool account, the selling member shall issue Delivery Out (DO) instructions to the exchange before the dead line. While filling up the account transfer form, the client should ensure that all the
details as mentioned below have been correctly entered and all the holders have signed the form; -
ICIN.This will be available in the demat holding/statement.
Quantity. This is the number of units sold by the client. The client should ensure that he is in possession of such units on the date of execution.
Execution date. The date on which the client intends to transfer his units to the CM pool
account of the respective member.
Market type and settlement number. This is made available by the exchange through a
circular, which is issued every month. The client can also get the same from his broker or
DP
The client should submit the form to his DP and take an acknowledgement for the same.
The DP shall execute the transfer the bullion from the clients account to the respective
members pool account. The member is also required to ensure that it has received all the
deliveries from his clients before the scheduled pay-in time. The member shall also
ensure that he has transferred the same to the exchange before the pay-in deadline. On
T+2, the exchange will declare pay-out of units. The exchange will transfer demat credit
into the CM pool account (NSDL/CDSL) of the respective members equitant to their net
buy position. The member, in turn, will transfer demat credit to the respective clients beneficiary accounts. The exchange will receive / transfer units on net basis. The member will be required to get transfer of units from other selling clients and to transfer units to all buying clients so as to ensure discharge of total delivery obligation at client level.
