Dramatic rise in Chinese demand to boost silver market

The Chinese are dramatically increasing their purchase of silver and gold as they are in the process of diversifying their assets away from the dollar.

Silver has especially become attractive to the Chinese, owing to its value as jewelry and industrial metal besides being an essential component in electronics and automotive industry, Commodity Online said in a report on Monday.

The dramatic rise in China's interest in silver is evident from the fact that the country imported an unprecedented 14 percent of global silver in 2010, whereas it was net exporter of silver till recently.

You have the Chinese sitting on a store of $2.5 trillion US of which they know is completely useless, so I think they are looking at gold, but also at silver as a store of value and a way to hedge against the decline of the US dollar, the article quoted Chris Berry, founder of Mountain House Partners, as saying.

The unprecedented rise in demand in one of the largest silver market places in the world will help sustain the recent boom in silver prices.

While the SPDR Gold Trust exchange-traded fund (GLD) has increased 23.7 percent in the past twelve months, the corresponding silver exchange-traded fund (SLV) has skyrocketed 113.3 percent in the same time period, the article says.

The precious metal has far outshined gold in recent months even as alternative investment options were in the focus ever since the financial crisis weakened conventional investment positions.