On December 5, AusGroup noted that the significant rally in the silver market this year has been largely driven by India's investment demand, pushing prices to a historic high of $59 per ounce. While India has long been a major player in the silver market, the scale and pace of this demand surge have notably altered global supply and demand dynamics.
According to Metals Focus, India now accounts for nearly 80% of global demand for silver bars and coins, while also maintaining its position as the world's top consumer of silver jewelry and utensils. AusGroup believes this robust physical demand is not only rooted in cultural traditions but also fueled by recent upgrades in urban and rural consumption structures. Research updates indicate that over the past five years, local consumers—particularly lower-income rural households—have purchased approximately 29,000 tons of silver jewelry and 4,000 tons of silver coins, forming a significant part of global silver investment.
A potentially more impactful change stems from new regulations by the Reserve Bank of India (RBI). AusGroup highlights that the policy, set to take effect on April 1, 2026, will allow residents to use silver as collateral for loans from banks and non-banking financial institutions, effectively opening a formal monetization channel for silver assets. Traditionally, Indian households have relied on gold as emergency collateral, but silver—being more affordable—has accumulated widely among middle- and low-income families, including through traditional jewelry and household utensils. With the new collateral system, these dormant assets are expected to gain systematic liquidity.
Recent spikes in India's silver imports have been partly attributed to anticipation of this regulatory change. Official data shows October silver imports surged to $2.72 billion, compared to just $430 million a year earlier. AusGroup observes that such structural demand shifts have quickly impacted global markets, leading to inventory shortages in London's over-the-counter market and soaring lease rates, ultimately driving silver prices past $50 and sustaining high levels.
Long-term trends suggest that gold and silver are gradually transitioning from "traditional symbols of wealth" to "monetizable assets" in Indian culture. Metals Focus notes that gold-backed loans currently account for about $38 billion in the country's banking credit, a sharp increase since 2021. In contrast, silver has historically struggled to enter formal collateral systems due to challenges like purity verification and inconsistent alloy ratios in traditional jewelry. AusGroup states that the new framework could resolve these uncertainties, positioning silver-backed loans as a complementary financial product to gold.
AusGroup concludes that India's structural shift in silver demand may not only reshape domestic household asset management but also exert long-term influence on global silver market dynamics, price cycles, and investment logic. As the new regulations take effect, silver's financial attributes and liquidity are expected to strengthen further, making it a key variable in the global precious metals market.