In a significant move affecting the precious metals market, India has reclassified the import status of unstudded silver jewellery from 'free' to 'restricted' until March 31, 2026. This decision comes in response to an unprecedented increase in imports from Thailand, raising concerns about potential circumvention of trade agreement rules.

Import Surge Triggers Policy Change

The Directorate General of Foreign Trade issued a notification following observations by the Commerce Ministry of a tenfold increase in silver jewellery imports from Thailand. The volume surged from 4 metric tonnes to 40 metric tonnes in recent months, with Thailand's share of these imports rising from 78% to 98%.

Suspected Circumvention of Trade Agreement

This dramatic shift in import patterns has raised suspicions that the rule of origin requirements for domestic value addition under the ASEAN free trade agreement may be being exploited. The sudden increase suggests possible circumvention of these rules, prompting the Indian government to take action.

Targeted Restrictions

The new import restrictions primarily target consumer or retail-related silver jewellery products. Industry experts anticipate minimal disruption to the broader silver industry, as the measures are specifically aimed at addressing the anomalous import surge from Thailand.

Silver Market Performance

Amidst these regulatory changes, the silver market in India continues to show strong performance. Silver futures are currently trading at ₹1,34,336.00 per kilogram on the Multi Commodity Exchange.

Implications for the Market

This policy shift underscores India's commitment to protecting its domestic jewellery industry while ensuring compliance with international trade agreements. The restrictions are expected to level the playing field for local manufacturers and potentially reshape silver jewellery trade dynamics in the region.

As the situation unfolds, market participants will be closely monitoring the impact of these restrictions on silver prices, import patterns, and the overall jewellery industry in India and Thailand.

Silver prices have reached a 14-year high on the Comex, currently trading at $41.38 per ounce. This remarkable rally is fueled by robust industrial demand across various sectors, signaling a potential shift in the precious metals market.

Silver's Impressive Performance

Silver has delivered a 42% year-to-date gain, outperforming gold's 36% increase. This marks the strongest performance for both precious metals in seven years. In absolute terms, silver has risen by Rs 37,281.00 per kg, while gold increased by Rs 27,976.00 per 10 grams.

Industrial Demand Drives Silver's Rally

The surge in silver prices is primarily attributed to strong demand from multiple industries:

• Electronics
• Electric Vehicles (EVs)
• Solar Panels
• Data Centers
• Jewelry

Experts expect silver to break its four-year underperformance streak against gold, driven by industrial demand creating supply deficits. Peter McGuire, CEO of Australia-Trading.com, points to this robust consumption as a key factor in silver's impressive performance. He also highlights that decades of under-investment in the silver complex have contributed to the current price levels.

Silver vs. Gold: A Shifting Dynamic

While gold remains strong, with December contracts trading 0.74% higher at $3,542.00, silver is expected to outpace its more famous counterpart in percentage terms over the coming months. The gold-to-silver ratio is declining and trading below its 200-day moving average, indicating silver's relative strength.

Analysts cite silver's dual role as both precious and industrial metal as a key advantage over gold. McGuire projects that silver could move towards $43.00-$44.00 per ounce if the current momentum continues.

Price Targets and Investment Recommendations

Experts have set the following price targets:

Investment experts recommend a portfolio allocation of 70% gold and 30% silver. Conservative investors are advised to favor gold, while aggressive investors might consider switching to silver for potentially higher returns.

Broader Commodities Outlook

The commodities market as a whole is experiencing significant developments:

• US Tariffs: McGuire warns that US tariffs could reshape trade flows across all commodities, potentially impacting market dynamics.
• Crude Oil: A glut is expected by the end of Q3, which may push oil prices lower.
• Industrial Metals: Showing resilience, with copper hovering near $10,000.00 per tonne.

Market Expectations

As we move towards the year-end, commodities are expected to remain volatile but well-supported. This outlook is based on several factors:

1. A softer US dollar
2. Robust industrial demand
3. Shifting trade flows

Investors and industry observers will be closely watching silver's performance in the coming months, particularly its relationship with gold and its response to ongoing industrial demand.

The current silver rally underscores the metal's dual role as both a precious metal and an industrial commodity, highlighting its unique position in the global markets. As industries continue to evolve and demand for silver in technological applications grows, the metal's importance in the global economy may only increase.