Silver May Top $30 Next Year as Investors Seek Store of Value, GFMS Says

Silver probably will top $30 an ounce in 2011, a gain of at least 17 percent, on demand by investors seeking a store of value, GFMS Ltd. said.

The metal will average $19.94 this year and around $28 next year, GFMS, a London-based research firm, said today in a report. The spot price averaged $14.70 in 2009. Investment demand was projected to rise to an all-time high of more than 210 million ounces in 2010, and fabrication and industrial use also climbed, GFMS said.

The price of silver for immediate delivery was up 52 percent this year to $25.60 yesterday, partly because buyers used the metal as alternative to currencies. This month, the dollar fell to the lowest level since December against a basket of major currencies, and the euro has fluctuated amid debt concerns in Greece and Ireland. Gold rose to a record last week.

“The main driver of the price remains investment demand,” GFMS said.

Silver supplies will rise 5 percent this year, and “investors will be of a mood to absorb the resultant, growing surplus as key supports such as ultra-low interest rates, a weakening dollar and a buoyant gold market should remain with us,” GFMS said.

This year, fabrication demand will increase 10 percent and industrial use will climb 18 percent, GFMS said. Mine production will advance more than 3 percent, and scrap supplies will jump more than 10 percent, the company said.

In 2010, gold futures in New York have climbed 22 percent, heading for the 10th straight annual gain. The metal reached a record $1,424.30 an ounce on Nov. 9. On that date, silver futures reached a 30-year high of $29.34. The all-time high was $50.35 in 1980.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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