Silver Prices to Rise

Silver prices could rise to $50 an ounce or higher by the end of 2012 as investment demand surges, according to the Thomson Reuters GFMS.

Fabrication and industrial demand for silver are forecast to increase by about 4 percent in 2011 to a new record high, with further, modest growth predicted for 2012, Philip Klapwijk, global head of metal analytics at Thomson Reuters GFMS, said in its “Interim Silver Market Review” at an annual meeting of The Silver Institute.

The report stated that industrial off-take is set to rise despite the Japanese earthquake, weak economic growth in western economies and the end of stock replenishment. It noted that jewelry demand is likely to edge higher despite stronger silver prices, while silverware and photography will weaken further. However, demand for coins and medals are set to establish a new record high, achieving the largest gain, in volume terms, of any category of fabrication demand in 2011.

Thomson Reuters GFMS stated that further noteworthy gains are forecast for mine production and scrap in 2011, although these will be countered by a heavy fall in government sales and, to a lesser extent, producer hedging.

The London-based precious metals consultancy said that the value of world investment is projected to reach a new high of $10 billion in 2011 on a net basis and conditions are likely to remain highly supportive of further growth in investment demand in 2012, underpinning additional price gains.

“However, downside risks remain, including the potential for the sovereign debt crisis to precipitate a liquidity crunch, impacting the 'real economy,'" it warned.

Investor activity underpinned silver’s moves this year, which saw it rally near $50 per ounce in April before correcting sharply in both May and again in late September. The main factors driving these price moves were those impacting gold, namely the Eurozone sovereign debt crisis, inflationary fears, loose monetary policies and a weak U.S. dollar.

The report said that world investment in silver, including coins and medals, will reach a projected 278 million ounces in 2011, a slight drop from 2010. The investment, however, will set a new record high in value terms and further gains are projected for 2012, it noted.

Thomson Reuters GFMS forecast the annual average price of silver at $35.66 an ounce in 2011, up by 77 percent year-on-year. It expects prices to reach an annual average of over $45 per ounce in 2012.

-Rapaport