Although the 23% rise in the silver price since January 2016 is mostly attributed to stock market swings and U.S. dollar volatility, the gains are actually due to rising global demand.

[ad#Google Adsense 336×280-IA]While the data for 2016 is still incomplete, the general trend over the last seven years has been soaring silver demand…

According to the Silver Institute’s World Silver Survey, demand for physical silver jumped 35.4% from 864.2 million ounces in 2009 to 1.17 billion in 2015.

That caused global producers to increase silver production every single year over the same period. In fact, production jumped 23.6% from 717.3 million ounces in 2009 to 886.7 million in 2015.

And silver consumption in the world’s biggest regions is responsible for this growth. From 2013 to 2015, silver bar ownership in North America jumped a whopping 150% from roughly 20 million ounces to 50 million ounces.

But there’s a different country that will be largely responsible for the 39.6% rally in silver prices this year.

That’s because this nation is on the verge of a huge economic crisis…

This Country’s Crisis Will Boost the Silver Price 39.6% This Year

The country we’re referring to is India.

India is the world’s biggest silver importer. In 2015, it brought in a record high 256 million ounces, according to the Silver Institute. This beat out the United States, which also imported a new high of 223.5 million ounces.

The country’s imports are projected to stay at record highs in 2017. But imports could beat expectations if India’s prime minister passes a controversial policy in response to the ongoing currency crisis.

You see, Indian Prime Minister Narendra Modi took office in 2014 with promises of boosting manufacturing and creating jobs. He pledged to do this by passing measures to open up foreign investment in India’s businesses. Since then, he’s mostly delivered on this promise. More than $55 billion worth of foreign investment flowed into India in 2015 – up 15% from about $47.8 billion the year before.

But even bigger on Modi’s platform is ridding India of corruption, most of which stems from this $500 billion problem that’s plagued the country for years…

Why the Fight Against Corruption Will Boost the Silver Price in 2017

Modi’s goal to decrease corruption can only be achieved through decreasing the amount of black money circulating in India. Black money refers to money or income acquired through illegal means.

Back in 2012, India’s Central Bureau of Investigation said Indian citizens deposited the dollar equivalent of $500 billion in foreign banks. That makes India the biggest foreign depositor of black money in the world.

To fight the country’s black money problem, Modi gave a surprise speech on national television on Nov. 8, 2016. He declared the 500- and 1,000-rupee notes would be invalidated and pulled from circulation just four hours after the speech. Since the 500- and 1,000-rupee notes were India’s most common denominations, the speech meant 86% of India’s cash immediately became worthless pieces of paper.

The decision sparked what’s now being called the India currency crisis. Modi’s decision was instantly felt across the economy as banks faced cash shortages, which has hurt small businesses. After all, 98% of all consumer payments are in rupees, Bloomberg reported on Jan. 17.

What does all of this have to do with the silver price? Just take a look at how citizens are responding to the panic…

In the hours following Modi’s announcement, citizens frantically rushed to convert their 500- and 1,000-rupee notes into gold. This sharply spiked local gold prices in India to upwards of $2,800 an ounce. Now, metals traders think the government will impose restrictions on how much gold citizens can own.

If Modi actually restricts gold ownership, the only other precious metal to buy will be silver. According to Money Morning Resource Specialist Peter Krauth, this will spike silver demand and send silver prices soaring to $24 an ounce sometime in Q2 2017.

That would be a generous gain of 39.6% from today’s silver price of $17.19.

“There’s been a rumor that people will flock to silver because the government might limit how much gold people can own,” Krauth – a 20-year veteran of the precious metals market – told Money Morning readers last month. “If you get one of these wild-card factors, we could see silver reach maybe $24 as of Q2 onward.”

The Bottom Line: While global silver demand is largely responsible for the silver price rally since 2009, demand in India alone will be responsible for the continued rally in 2017. The India currency crisis is an ongoing issue that could have broad negative effects on the country’s citizens and economy. However, silver investors stand to benefit greatly from the turbulence as silver prices are expected to gain 39.6% to $24 by the second quarter.

— Alex McGuire

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Source: Money Morning