As India continues to wage war with gold, investors are seeking out the yellow metal through any means available. Reports today suggest that there is not enough room on commercial flights into Dubai for all those investors seeking to purchase gold. “I cannot find a place for transporting gold on Emirates, on BA or Swiss Airlines this weekend,” lamented Tarek El Mdaka, the managing director of Kaloti Gold in Dubai adding he is shipping as much as 2 tonnes of gold every day.1 As we had suspected, it would appear that the Indian gold trade has moved offshore to avoid the restrictions on imports and extra taxes imposed. However, this is not the biggest change in the Indian precious metals market – silver imports have exploded.

Silver has not been exposed to the same import restrictions that gold has and recent silver import figures confirm that investors have flocked to silver, likely as a substitute for their desire for gold. And why shouldn’t they? With limited bank branches in the country, owning precious metals is synonymous with savings and security. While it seems that the larger investors have moved their gold purchases offshore, we suspect that the majority of Indian investors have turned to silver as a substitute for gold. The recent import numbers are staggering.

While India imported 1,900 tonnes of silver in 2012, in the first five months of 2013 alone, imports have touched 2,400 tonnes. According to industry estimates, silver imports during the January-March quarter stood at 760 tonnes. Imports shot up to 720 tonnes in April alone, and in May they further swelled by 920 tonnes.2 Let’s put these numbers in perspective, according to the Silver Institute, the world produced 24,478 tonnes of silver in 2012, implying that Indians have imported almost 10% of world production so far this year. If they continue to import at the same rate as they have in May, over the next 12 months India could import close to half of world silver production which is a truly staggering shift in demand for silver.

The next salvo in the war on gold occurs this Monday July 1st when “The All India Gems and Jewellery Trade Federation” (representing 90% of jewelers in India) declares a ban on its members selling gold bars and coins. It’s almost unbelievable that this retail federation would impose an all-out ban on purchasing gold for investment purposes, but all is fair in love and war. However, Indians aren’t phased and are shrugging off this ban and investing their rupee’s in silver instead.

This new import data shows that the victor in India’s “War on Gold” – will be silver.

1Gold rush 2013 style has Dubai scrambling. http://www.thenational.ae/business/industry-insights/markets/gold-rush-2013-style-has-dubai-scrambling#ixzz2XTAh0M1K