India's curbs on silver imports have drained supply from the world's largest silver market, lifting local premiums to a six-month high even as demand runs weaker than usual. Because India buys more than 80% of its silver abroad, the pullback could press on global prices while easing strain on the rupee.
Silver premiums over official domestic prices in India jumped to $6.5 per ounce this week, more than 10% above benchmark prices, dealers said. That marks a sharp reversal from May, when the same metal traded at discounts of as much as $5.5 an ounce. The swing followed New Delhi's move to restrict overseas supply into the country's silver market.
Imports slow to a trickle
India restricted imports of silver in nearly all forms in mid-May with immediate effect. In June it tightened the rules further, adding silver grain and powder to the restricted category and requiring prior import authorization.
Silver imports fell to 46.8 metric tons in May from 534.3 tons a year earlier, according to trade ministry data. A leading importer said the metal is now trading at significant premiums to global prices, noting that shipments have nearly stopped.
Pressure on the rupee
The curbs sit within a broader push to trim precious-metals imports and defend the currency. New Delhi raised import duties on gold and silver to 15% from 6% to ease pressure on its foreign exchange reserves and support the rupee.
Because India meets more than 80% of its silver demand through overseas purchases, lower buying could weigh on global prices while narrowing the country's trade deficit. India sources its silver mainly from the United Arab Emirates, Britain, and China.
Source: KITCO
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