Silver to surpass US$20/oz – GFMS

Production and Markets

GFMS, the metals consultancy, says it expects the silver price to surpass US$20/oz in the short term on the back of continued investment in the precious metal.

“Following a ‘summer lull’, since September there has been a robust expansion in investors’ long positions in all investment arenas,” said a statement on the launch of the Interim Silver Review.

The consultancy cited gold’s strength, US dollar weakness, concern over potential future inflation and a general increase in interest for commodities as key investment drivers.

The London fixing price averaged US$14.06/oz in the first ten months of 2009 and with the price last at US$18.20/oz, GFMS predicts it to rise to a US$14.38/oz average for the full year.

Conditions are however expected to become less supportive for investment during the course of 2010 as the economies gradually recover, short-term interest rates rise and the US dollar stabilises.

As a result silver’s average price in 2010 is expected to fall slightly from this year’s forecast level.

On the supply side, mine production is expected to increase 2% in the current year, although it is expected to be offset by lower scrap and government sales.

Fabrication demand which is forecast to have fallen steeply from 2008 levels is expected to have a fair recovery in 2010.

Silver's use in the cinematic industry has been hard hit according to the review, as a lack of financing has led to a drop in the number of films produced. “Silver’s supply/demand fundamentals (excluding investment) should become more supportive in 2010, largely due to a recovery in fabrication demand,” said the review.