Investor demand could push silver price to $15/oz
Wednesday, 15 November 2006, 20:30 IST
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New Delhi: Silver prices are expected to follow the trend of gold and scale back to $15 per ounce over the next few months- thanks to the rising investor interest, according to the London-based metals consultancy GFMS Ltd. "The fabrication demand is forecast to fall by just over three percent this year, largely shaking off the impact of the massive price rise in 2006," states the global consultancy in its Interim Silver Market Review. "The investment demand has driven prices higher and could take silver back to the $15 level in the next few months," it states. The investment demand has risen in 2006 for the third consecutive year and may well exceed a net 80 million oz (2,500 tonnes) this year. For the first 10 months of this year the average London silver price was $11.24, up 58 percent year-on-year. "The investment demand remains the main driver of the price. It has raised silver to well above the equilibrium level that would likely prevail in the absence of investment," states the report. The review has forecast a three percent or nearly 28 million ounce (860 tonnes) drop in the fabrication demand from the revised level of 2005 due to a likely dip in the global industrial production and high prices this year. The lower silver jewellery and silverware demand is expected mainly due to the drop in manufacturing in price-sensitive India. "Jewellery and silverware fabrication in many countries has been little affected by the silver price rise. However, in the case of the key Indian market, a continued secular shift in favour of investment in bullion instead of high carat jewellery plus the impact of record local prices has had a dramatic impact on demand," GFMS states. "Lower Indian fabrication explains much of the near eight percent year-on-year global fall forecast for this category." Despite the expected drop in the industrial demand in 2007, GFMS believes that "silver (price) is more likely to follow gold's lead (higher) than base metals' direction (lower) over the next year." The industrial demand was strong over the first half of 2006 but has slowed in the recent months. GFMS has nonetheless currently forecast a full year gain of nearly one percent in silver consumption to a new record level. India's annual silver consumption is 2,500-3,000 tonnes, with much of it imported.
Source: IANS
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