www.miningmx.com | gold_silver Investors will drive silver prices higher

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Investors will drive silver prices higher
Allan Seccombe
Posted: Wed, 07 Nov 2007

[miningmx.com] -- SILVER prices, which touched a 27-year high of $16.19/oz on Wednesday, will be driven higher by additional investment inflows into the metal, GFMS said in its interim Silver Market Review.

Precious metals consultancy GFMS said silver will trade in a range of $13.20 to $16.50 over the next 12 months because of fresh investment inflows.

The silver price has caught a ride on the coattails of gold in recent weeks. The gold price has shot up to 28-year highs and is hovering under the all-time high of $850/oz. The spot gold price hit a high of $845.50 on Wednesday.

�It's a one-way street at the moment. Strong oil prices, a weaker dollar, subprime issues and a rush into safe-haven -- everything is supporting," Jeremy East, global head of metals trading at Standard Chartered Bank is quoted as saying by Reuters.

In the first 10 months of 2007 the average price at the London fixing was up 17% year-on-year at $13.16.

�Although it is investors who have driven silver prices high in 2007, this move has been underpinned by the resilience of fabrication demand and its short-run price insensitivity plus the absence of overall supply growth,� GFMS said.

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�Investment demand will remain the key to silver�s price prospects over the next year,� it said.

�In fact, more will be required from investors because silver�s supply/demand fundamentals are expected to deteriorate, with a surge in mine production and lower fabrication demand forecast by GFMS for 2008.�

Investment interest in silver appeared to be a little weaker than in 2006, but it has rebounded in the fourth quarter of the year.

�After an initial delay, silver has responded to gold�s earlier reaction to the financial markets� crisis and the slide in the US dollar,� GFMS said.

Over the first 10 months of the year, holding in silver-backed exchange traded funds increased by 23 million oz. However, there has been a decline in investors� net long futures positions.

Mine output is seen increasing by 23 million oz this year, up 3.6% from the previous year. Next year, production is forecast to increase by seven percent, largely thanks to the San Cristobal operation having a full year�s output.

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