By Deepa Gopalan
ET Intelligence Group

Silver as an investment has potential too, though not as much as gold

Bullion prices have been on the upswing in recent months and have touched new highs. While attention both in India and across the world has been focused on gold, silver hasn't evoked as much interest. But there has been a silent rally brewing in the silver market too.

First, some basic facts. Prices of silver in India are linked to international silver prices, so the rise in local silver prices is clearly the result of international price movements.

Silver is usually at the bottom of the precious metals' chain, after platinum and gold. Experts in the international markets believe that when gold becomes too expensive, demand shifts to silver, driving up the prices. Further, the rising industrial demand for silver worldwide has also fuelled the prices.

For all those looking at this for an investment, what are the various avenues of buying silver? Considering India's fascination for jewellery, this is one of the most preferred choices when buying silver. In forms other than jewellery, silver can be purchased as coins with images of gods embossed on them.

In India, there is a trend to purchase silver articles such as silver utensils or even idols of gods or lamps during festivities such as Diwali or Dashera.

But an important point to remember while buying silver is that there is no standardisation. Unlike gold that is hallmarked by the Bureau of Indian Standards (BIS) or platinum, which is certified by Platinum Guild International (PGI), silver does not have any hallmarking or certification.

The BIS is likely to introduce hallmarking for silver in the near future. But until then, make sure your purchases of silver are made only from a reputed jeweller, so that you can get an assurance of quality.

Silver can now be traded in the futures market too. Several commodity exchanges such as Multi Commodity Exchange (MCX), National Commodities and Derivative Exchange (NCDEX) and National Multi Commodities Exchange (NMCE) have started operations and a woman can get a position here depending upon her outlook.

Like gold, silver is also unusable in its 100 per cent pure form. Silver used in jewellery is referred to as sterling silver and is of the highest possible purity. The rest of it is a combination of metal alloys used to make the piece less malleable and more sturdy. In India, however, the common range for proportion of silver in jewellery is between 70 and 85 per cent.

When you have an option between buying silver jewellery and buying silver articles, consider these factors. The biggest difference in the price of one piece of silver as compared to another would be in its craftsmanship and finish. Silver being quite reasonably priced, jewellers like to make innovative and intricate designs as a result of which prices could vary greatly.

Further, as the purity level goes up, the article becomes malleable and hence has to be crafted very carefully. Therefore, the higher the purity, the more will be the charges for making the piece. The charges for making silver jewellery would vary between Rs two per gram and Rs four per gram.

The charges would vary depending on the purity levels as well as the intricacy of design. The making charge of silver articles like coins and utensils is quite nominal, as they do not involve intricate patterns.

Silver, like gold, can be resold. But as there is no standardisation of quality, some jewellers only repurchase items that have been purchased from their own stores. A few jewellers have a hologram of their logo on the article while others may require you to produce the bill at the time of resale. So remember to keep all records of your purchase safely. Also, at the time of purchase, don't forget to ask the jeweller whether he accepts repurchase.

Now, at the time of resale of articles, different jewellers have different norms. But generally, for higher purity articles, there is 100 per cent resale value while as the purity decreases, the resale value also falls, as the wastage tends to be higher.

So, if you have purchased a silver coin of 98.5 per cent purity, at the time of resale, you will get 98.5 per cent of the current value of silver. The market value of silver is usually quoted at 99.9 per cent purity.

In the case of jewellery, wastage of around Rs 20 to Rs 25 per 10 gram is the norm. So, you will get the total value of silver content in your piece minus the wastage charges.

In India, gold is the preferred metal. However, as silver offers scope for new designs, it is gaining more and more popularity among the younger generation.