Investing in silver can give better returns than gold this festive season

If your Dhanteras  shopping has mostly revolved around gold, its time to change tracks. When it comes to investing in bullions, gold has always been the preferred mode on festive occasions like Dhanteras. Silver, the poor cousin of gold, always lags behind while gold takes away all the glitter. But this time, silver will glitter more. If experts are to be believed, the white metal will outperform gold in the next one year, "Things are looking up for silver. A 20% increase in silver prices is expected compared to about 6% for gold from current levels. A price target of around Rs 47-48,000/kg is achievable in a year's time," says Jayant Manglik, president, Religare Securities

According to experts, the silver is quite undervalued. "The current gold to silver ratio stands at 75, which is close to extremes of 84. This indicates that silver is undervalued as compared to gold and is an early indication that it will outperform gold. It is the right time to buy and invest in silver from a medium to long term perspective," adds Manglik.

Buying would also be spurred by global factors like weakness in the US dollar, global low interest rate environment, geopolitical tension between the US and North Korea, higher valuations in equities. Silver is also a key ingredient in photovoltaic cells. "These factors coupled with a production plunge at four of the top primary silver miners by 27% (YoY) during the second quarter of 2017 will see a rally in silver, Manglik further informs.

Buying options
Silver is available in bars, coins, medallions and jewellery. However, you must go with minimum work on the metal. Any work attracts making or fabrication charges. So jewellery is ruled out of the options. The white metal in form of bars and coins are cheapest since they do not involve any fabrication charges. The work on the metal eats into the profit due to wastage and fabrication charges. Even utensils involve some fabrication and decreases the value of the metal. Hence, they are not good option.

Where to buy

While you can buy bars from National Indian Bullion Refinery, private banks like Axis Bank and government bodies like Metals and MineralsTrading Corporation (MMTC) sell coins and medallions in tamper proof packing and guarantees purity. However, there is catch involved. You get the metal at a considerable premium to the market rate. It is wise to get hold of the silver from a credible jeweller who can also give you a certification of purity.

Alternatively, you can buy silver in the commodity futures exchange too, but the contract sizes are large. The smallest contract in silver (silver micro) is traded in units of 1 kg and delivered in minimum lots of 30 kg. Also, you have to pay initial margin.

Unlike gold ETF, there is no silver ETF in India. However, brokers are increasingly making efforts for its introduction to help investors capture the appreciation in silver without physically owing it.

Where to sell
If you want to sell your silver bar or a coin, the traditional jeweller is the best option. While banks sell silver, they can't buy back. This holds true for MMTC too. Jewellers are more happy to buy your silver if it's in crude form.