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A spike to $15 forecast for volatile silver
Allan Seccombe
Posted: Wed, 15 Nov 2006
[miningmx.com] -- SILVER production is forecast to rise sharply in 2007 after a small increase in 2006, which is expected to see record demand from the industrial sector, GFMS said on Tuesday. Prices in coming months will be volatile, and could spike to $15/oz.
Mine production this year is seen increasing by four million ounces or 0.6% o on the back of higher output of gold and base metals from which silver is a by-product, GFMS said in its interim review.
Primary silver production will come down three percent this year, but overall, silver output will rise 16m oz in 2007, continuing to grow into 2008.
Silver prices are expected to track gold’s forecast rise in the coming year, GFMS said.
“GFMS expects significant price volatility, but, over the next few months at the least, a bias to the upside, with a spike to $15 very possible,” the London-base precious
metals consultancy said in a statement.
In the first ten months of 2006, the silver price averaged $11.24/oz, a gain of 58% year-on-year. Silver was bid at $12.85 in late London trade.
Industrial demand, which accounts for half of total fabrication, will gain nearly a percent to reach a new record level, but slower global industrial production and a weaker electronics sector will see demand falling in 2007, it said.
On the supply side, scrap supplies are seen unchanged in 2006 and government sales will increase only slightly.
“There is strong evidence that Chinese and Russian sales have held up in 2006, probably due to the attractive price level. In addition, India looks likely to sell up to 30m oz into its domestic market,” GFMS said.
In India, jewellery demand has been hit hard by a shift into bullion and record high local prices. “Lower Indian fabrication explains much of the near eight percent year-on-year global fall forecast for
this category.”
Investment demand for silver has been strong in 2006 and holdings could exceed a net 80m oz. Silver-backed exchange-traded funds accounted for nearly 105m oz of silver.
“At some point the ETF could start to represent an overhang, although, arguably, this risk is moderated partly because the ETF’s ownership is broad rather than narrow,” GFMS said.
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