As our regular readers are quite aware, the Indian government played a vital role in the massive downturn that precious metals experienced throughout the course of 2013. This came in the form of the capital controls and import restrictions placed on gold.
At the time, when these draconian measures were first brought into place, I noted that it would have affected. Illegal smuggling of gold would drastically increase and the demand for silver would surge. As we know, the surge of gold smuggling has surpassed that of illegal drugs, but until recently we did not have a clear picture of how exactly silver was being affected by these restrictions on gold. Now we do.
The results were far more dramatic than I could have predicted. Demand for silver surged. In 2012, the net demand for silver stood at 2115 tonnes. By the end of 2013 this number surged to 6125 tonnes, an increase of 4010 tonnes!
Fortunately for the citizens of India, silver, like gold has a historic track record of being a safe haven asset in a time of need and a valuable tool when attempting to protect yourself from currency debasement.
It’s likely that Indian demand for silver will not remain this intense for the course of 2014. This of course all hinges on India’s Finance Minister P. Chidambaram standing by his word and loosening controls over the importation of gold. A decision that would see pent up demand surging into the yellow metal.
