Silver Demand Rose 0.9% Last Year on Investor Buying, GFMS Says

Silver demand climbed 0.9 percent in 2012 as investors bought exchange-traded products backed by the metal, Thomson Reuters GFMS Ltd. said.

Demand rose to 1.048 billion ounces from 1.039 billion a year earlier, GFMS said in a report published today by the Washington-based Silver Institute. Investors bought 160 million ounces as the value of holdings in ETPs rose to a record $18.9 billion at yearend, up 16 percent from a year earlier, the report said.

Prices gained 8.3 percent in New York last year as the U.S., China and Japan announced stimulus measures to shore up their economies, boosting the appeal of precious metals as a store of value. The metal has plunged 24 percent in 2013 as subdued inflation and a rally in equities cut demand. Slowing growth in China, the world’s second-biggest buyer, may crimp silver’s use in industrial applications.

“Silver took a tumble along with gold, and concerns about China remain,” Neil Meader, the global head of metal analytics in London at GFMS, said in a telephone interview before the report was released. “We expect prices to rebound as the safe- haven buying will re-emerge because of global economic worries. Also, the appetite for silver ETPs remains strong.”

Prices will average $28.50 an ounce in 2013 compared with $31.15 last year, Meader said. Silver futures for July delivery dropped 2.2 percent to $22.866 on the Comex in New York yesterday.

Silver ETPs

Silver assets in global ETPs reached a record 19,738.2 metric tons in March, and are up 2.8 percent this year, data compiled by Bloomberg show. Investors have preferred silver to gold in 2013, as holdings in bullion-backed ETPs have dropped 12 percent.

Fabrication demand slipped 6.6 percent to 846.8 million ounces last year because of a slowdown in several economies, GFMS said. Coin and medal purchases slumped 22 percent to 92.7 million ounces, while jewelry purchases slid 0.5 percent to 185.6 million ounces. Use in photography declined 13 percent to 57.8 million ounces, GFMS said.

Mine output rose 4 percent to 787 million ounces, the researcher said. Government sales of the precious metal fell 38 percent to a 7.4 million ounces. Scrap supplies slipped 1.6 percent to 253.9 million ounces, the researcher said.

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To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Patrick McKiernan at pmckiernan@bloomberg.net

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