As observed by many analysts across the world silver has been surpassing gold investments in yielding attractive returns for the investors. In last one year, silver has drawn attention of global investor community as the grey metal has outperformed gold by gaining over 24% against 16% return in gold. India, which has been the largest consumer of gold, is now found changing its focus to better yielding precious metals like silver. Several bullion traders in India have shown their interest in launching varied products for silver investments.
Mumbai-based Prithviraj Kothari, Managing Director, RiddhiSiddhi Bullions Limited (RSBL) one of the largest bullion trading companies in India is of the opinion that silver is the next big opportunity for investing after gold, which is found falling short in meeting investors' expectations for steep growth in returns. In an interaction with Rutam Vora of Commodity Online, Kothari shared his views on better investment opportunity available in India and the company's future plans of introducing new trading products. Excerpts:
Commodity Online: How is the current investment scenario in bullion market?
Prithviraj Kothari: The bullion market in India is mainly driven by overseas fluctuations in the US interest rates and currency movements. Till recently, gold had been a primary choice of investors for investments, but currently the prices are valued at higher side. In the US markets, currency is appreciating and equity markets too are showing improvements. Considering this fact, gold prices may remain range-bound and return should be on a lower side.
CO: How much return should one expect from gold investments? Where the prices are seem to be heading to?
Kothari: Gold is now becoming less yielding considering the global outlook. One should expect an average return of about 6-9% on gold investments. Looking at the upbeat investment scenario across the globe and stock markets being positive, I believe that gold prices may touch USD 1050 per ounce in the international market.
CO: What is your view on gold being as a potential investment option for better returns?
Kothari: Looking at the current global scenario and recent sluggish price movement of gold, it seems that silver is a better opportunity to invest in. Silver has a potential to emerge as a most favourite investment instrument as gold is not able to maintain the bullish nature all the time. In recent months, gold prices have touched their all time of over USD 1200 per ounce but there are not much chances of sustaining this upward rally over next few months as the global economic factors are hampering the bullishness nature of gold. On the other hand, silver is now becoming better investment opportunity with steady rise in returns. On an average, gold investments yield about 6-9% but silver would give about 18-24% returns.
CO: Why silver prices are so bullish? What is driving the prices?
Kothari: Silver, unlike gold has multiple applications including industrial uses. This has created large opportunity for better returns. I believe that silver is the latest investment destination with comparatively healthy return against gold and currency. Looking at the market potential we are also considering coming up with a silver exchange traded fund (ETF).
CO: How will you go with your plans for the silver ETF?
Kothari: Looking at the positive response to gold ETF, silver ETF is also expected to get similar acceptance. We have already filed for the regulatory approvals for ETF and awaiting green signal from the authorities. Once we get the approval, ours will be the benchmark price for silver ETF in India.
CO: What is your growth guidance for the company?
Kothari: We have performed sufficiently well for over more than past 25 years. We are an authorized participant (AP) of all the gold exchange traded funds (ETFs) in India and we are also the largest creator and redeemer of such units of these funds. Last year, we had posted Rs.7900 crore of turnover, which is expected to rise up to Rs.15,000 crore in fiscal 2010.
CO: What is the driving force for this growth in the business?
Kothari: Through our online SPOT trading platform for the jewelers and retailers, we have successfully achieved significant volumes. Currently, we have 1020 clients across 17 centers located throughout the country. We have seen 200% growth in this segment and expect to continue this trend in future as well.
CO: Any plans to foray into jewellery business?
Kothari: We are seriously thinking on this front. But for this, we have set a target of networking with 2000 rural retail outlets, which is expected to be achieved by 2011. Once that is done, we will have strong presence in the rural market in India, then we will diversify into jewellery business.