Country accounts for 12.6% of total world-wide silver demand
It was a bullish third quarter for silver prices as the white metal rose 25%.
Of late, silver has been outperforming gold, trading with greater volatility and producing healthy returns for silver exchange-traded funds (ETFs).
While investors who typically favor gold investments have started eyeing up silver, they're joined by another classic gold lover: India.
India sees silver as an undervalued investment with strong upside potential. This bullish view comes from a country that accounts for 12.6% of total world-wide silver demand, according to the precious-metals consulting firm GFMS.
With a weak Indian rupee, gold prices (in rupees) have reached an all-time high in 2012, while silver prices have not surpassed their April 2011 record. Rupee-denominated silver has been quoted around 20% lower than its record, according to FX Street.
In September, silver futures contract volume traded on India's largest commodity exchange, the Multi Commodity Exchange, rose 30% as compared to July's numbers.
Meanwhile, gold futures volume declined 10% in the same time frame.
Silver dealers in India said most return-focused investors have chosen to hold on to their purchases in anticipation of rising prices over the next three to six months.
Indian investors also have slowed silver buying because the two-week period that ends Oct. 15 is considered inauspicious, but are expected to resume their purchases as soon as the period ends, according to The Wall Street Journal.
Indian silver demand will pick up after that as the country prepares for the Hindu festival of lights, known as Diwali, on Nov. 13.
Silver gets global attention
Along with silver's rising appeal in India, Shanghai is also showing some love for the white metal.
The Shanghai Future Exchange began trading silver futures back in May, entering a market that had been in China, bringing hopes for liquidity in the precious metal.
Expectations were high for the product and it's been a good ride to-date. Silver has seen some of the greatest gains in the exchange's suite of precious metals.
At September's end, silver futures had increased 29% on the exchange as compared to June's volume numbers.
Gold's rise was lower, gaining 13% during the same period.
But in the short-term for silver prices, it's all about Indian investors.
"Chinese demand for physical silver delivery hasn't changed that much, and actually most people are focusing on the Indian investors and their demand for silver instead," Mark To, an analyst at Wing Fung Financial Group, told The Wall Street Journal.
And as we know, with greater demand comes higher prices.
On Thursday, December silver futures in India closed up 0.26% to 62,483 rupees per kg while December gold hit five-week lows at 31,234 rupees.
This global interest, along with central bank action, has made silver one of the hottest investments to make ahead of 2013.
"We're going to see new highs in both gold and silver in the first half of the New Year," said Money Morning Global Resources Specialist Peter Krauth. "I don't see anything that will keep this from happening."