As the Indian government cracks down on large denominated bills, and is reportedly considering measures to limit gold holdings, silver has emerged as a potential major beneficiary.

Written by etfDailyNews.com

First, let’s recap just how important gold is in Indian culture, and in the country’s economy as well. From The Conversation:

Indians’ famous love for gold has created serious and ongoing economic issues for the nation. In 2011, Australian investment bank Macquarie estimated that 78% of India’s household savings were held in gold.

This unique cultural norm means that India has, in essence, a dual currency system. On one hand, you have the official government-issued rupee, and on the other, gold. For many years, the yellow metal has been the preferred by the vast majority of people, and that’s unlikely to change any time soon.

If the Indian government decides to crack down on gold holdings — as some believe they will — silver could begin to take gold’s place. In fact, a trend toward silver has already begun taking hold:

Growth in Indian Gold and Silver Jewellery Demand. Source: Thomson Reuters GFMS Gold 2016 and Silver Survey 2016

How big could India’s impact on silver prices be? Absolutely massive:

Even a small substitution from gold to silver would result in a massive increase in the price of silver. A 10% reallocation from gold jewelry investment to silver in India would nearly double world silver jewelry demand. Mines and other sources would not be able to fill the gap immediately; prices would rise, further fueling demand and creating a new, shiny headache for those trying to marshal India’s unusual economy.

So, while the yellow metal is still the king in India, don’t discount the gray metal’s prospects for growth.

The iShares Silver Trust ETF (NYSE:SLV) rose $0.42 (+2.65%) to $16.27 per share in Wednesday afternoon trading. Year-to-date, the largest ETF tied to silver prices has gained 23.35%.