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Silver survey: investment key to silver-price action in 2011; mine supply hits record high

World silver mine supply climbed to a fresh record high in 2011, yet investment demand was robust enough to enable the average price to also hit a record high for the year, according to the World Silver Survey 2012 released by the Silver Institute Thursday.

In volume terms, new world investment dipped marginally from a year ago but remained “elevated,” according to the report. However, due to higher silver prices, the dollar value of silver investment rose sharply to an all-time high.

The World Silver Survey was compiled independently by the London-based metals consultancy Thomson Reuters GFMS. The report has been published annually since 1990 by the Silver Institute, an international industry association that includes silver producers, refiners, manufacturers and dealers

Investment activity was the principal driver of fluctuations in the silver price in 2011, said the World Silver Survey.

World investment (the sum of implied net investment plus coins and medals) dipped marginally year-on-year to 282.2 million ounces, or 8,776 metric tons. However, much of this occurred at higher prices. As a result, in value terms, world investment hit a fresh record of nearly $10 billion in 2011, up 73% year-on-year, said the report.

Implied net investment fell 11% to 164 million ounces (5,099 tons), although this remained near historical highs, the Silver Survey said. Much of the investment was concentrated in the first four months of the year when silver nearly hit $50 an ounce.

Apart from “robust” investment from institutional players, retail demand “performed impressively” in 2011, the Silver Survey said. Demand for coins and medals rose 129% to a fresh record of 118.2 million ounces (3,677 tons), the report said. Also, physical bar investment grew 67% to 95.7 million (2,975 tons).

Some of the strong silver demand came from traders playing the gold/silver ratio beginning in the latter part of 2010 and spilling over into 2011. They bought silver on an expectation that this metal would outperform gold. “The move in the ratio in silver’s favor definitely brought in more investors,” said Philip Klapwijk, global head of metals analytics with Thomson Reuters GFMS, in an interview in conjunction with release of the report.

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Posted by on Apr 19 2012. Filed under Silver Analysis. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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