The gradual rise in silver prices have acted as a deterrent to retail investor purchases in recent months, particularly in the key markets of US and India, says a report released by consultancy Metals Focus.

While US purchases have dipped in Q2 2016, in India, both Q1 and Q2 saw weak demand. US mint sales of siler Eagles touched 2.8 Moz in June, the lowest level since May 2015 with the exception of December, when the mint switches to a new series for the coming year is to be introduced.

In India, H1 2016 bullion imports are down about 40% compared to last year and are estimated to have reached a four-year low of 2,050t, the report added.

It further notes that different factors were responsible for weak demand in India during each of the quarters. It says, “In terms of the first three months, demand for small bars (and, to a much lesser extent, coins) was affected prior to the end-February government budget and then, subsequently, the 42-day long strike by the country’s retail jewellery sector (even though silver was not affected by the newly introduced excise duty).”

The strike impacted Q2 demand also, the report says, though it stresses that the rise in rupee silver prices was a more significant factor impacting demand during this period.

Looking ahead, the consultancy believes that a price correction may be required to boost renewed buying by retail investors in India, and notes that any further rise in the rupee price may even trigger outright liquidations if prices surpass Rs 50,000/kg. It adds that a normal monsoon would boost demand.

In the US however, weakness will persist and mint sales will improve only after the existing build up of dealer inventories have first been depleted, it said.

The report however notes that globally there has been a rise in institutional investment in the precious metal during the first half of the year,