In a move that has brought relief to the silver jewellery export sector, the Directorate General of Foreign Trade (DGFT) has clarified the import rules for silver jewellery. This clarification has removed market uncertainty and is expected to have a positive impact on the precious metals market.

Key Highlights

• DGFT clarification maintains exemptions for SEZs, export-oriented units, and DFIA license holders
• Market uncertainty resolved, eliminating premiums of ₹20,000-₹25,000 per kg before Diwali
• Silver prices reached a global high of $54.47 per ounce in September
• Current MCX silver price: Near ₹1,45,000 per kg
• Projected silver consolidation: Around ₹1.50 lakh per kg by end-2025
• Gold expected to consolidate around ₹1,25,000 per 10 grams by end-2025

Import Rule Clarification

The DGFT's clarification on silver jewellery import rules has been welcomed by the industry. The move allows continued exemptions for Special Economic Zones (SEZs), export-oriented units, and Duty Free Import Authorisation (DFIA) license holders. This decision aims to prevent misuse by non-compliant operators while supporting legitimate exporters.

Market Impact

The clarification has had an immediate effect on the market, removing uncertainty that had previously created significant premiums:

Bullish Outlook for Precious Metals

The silver market has shown strong fundamentals, with several factors contributing to its positive outlook:

1. Supply deficit for five consecutive years
2. Strong ETF demand
3. Increased central bank buying

Analysts project that silver prices may consolidate around ₹1.50 lakh per kg by the end of 2025.

Gold Projections

Gold, another key precious metal, is also expected to perform well:

• Projected consolidation: Around ₹1,25,000 per 10 grams by end-2025
• Driving factors:
  • Safe-haven demand
  • Anticipated Federal Reserve rate cuts

Export Boost

The clarification on import rules is timely, coinciding with the festive and wedding season. This is expected to provide a significant boost to silver jewellery exports, supporting the industry during a crucial period of demand.

Conclusion

The government's clarification on silver jewellery import rules, coupled with strong market fundamentals and positive projections for precious metals, paints a promising picture for the silver market. Exporters and investors alike will be watching closely as these developments unfold in the coming months.

Silver Exchange-Traded Funds (ETFs) have experienced a significant downturn, plunging nearly 19% from their October 15 peak. This sharp decline comes on the heels of a historic rally that saw domestic silver prices soar to unprecedented levels, even surpassing those witnessed during the infamous 1980 Hunt brothers incident.

Global Factors Driving the Decline

The silver market has been hit by a perfect storm of global factors:

• A stronger dollar
• Increased commodity risk aversion
• Trade tension concerns following remarks about delayed US-China meetings

These elements culminated in a 7.1% drop in global silver prices on Tuesday, sending shockwaves through the market.

Domestic Market Response

The ripple effects were felt strongly in the Indian market:

• During Muhurat trading, silver on the Multi Commodity Exchange (MCX) fell by ₹327
• Prices settled at ₹1,50,000 per kg

ETF Market Dynamics

The recent market movements have had a significant impact on silver ETFs:

• Premiums over international prices have disappeared
• Some ETFs are now trading at discounts to global benchmarks

In response to these changes, Aditya Birla Sun Life Silver ETF Fund of Fund has announced it will resume subscriptions from October 23, after weeks of suspension.

Long-term Outlook Remains Bullish

Despite the current correction, analysts maintain an optimistic long-term view for silver:

Bank of America's bullish outlook is based on structural supply shortfalls, even as they anticipate an 11% drop in demand next year.

Investor Implications

For investors, this volatility in the silver market presents both challenges and opportunities:

1. Short-term traders may need to reassess their positions given the sharp decline
2. Long-term investors might view this as a potential entry point, considering the bullish forecasts
3. ETF investors should monitor the changing dynamics between fund prices and underlying asset values

As always, investors are advised to conduct thorough research and consider their risk tolerance before making investment decisions in the volatile precious metals market.