Silver prices on average will fall in 2013 as supplies increase and investor demand ebbs, marking the second straight drop in a projected “multiyear” decline, CPM Group said.
The metal will average $25.85 an ounce, Jeffrey Christian, the managing director of New York-based CPM, said in an interview before the release today of the research company’s silver yearbook. That’s down 17 percent from $31.187 in 2012, the Comex futures average, partly because of a decline in use by the photography, jewelry and solar-panel industries. Last year, the price dropped 12 percent from 2011.
This year, silver has tumbled 25 percent, the most among 24 raw materials in the Standard & Poor’s GSCI Spot Index. The commodity entered a bear market on April 1 as slowing economies spurred concern that industrial demand will ebb. Holdings in exchange-traded funds backed by the metal have dropped 1.5 percent to 19,441 metric tons from a record on March 18, according to data compiled by Bloomberg
“Rather than buying the metal in a rising price environment with strong expectations for higher prices, investors now are commanding price dips,” CPM said in a statement. The price drop reflects “this new price-sensitive posture among investors combined with a reduction in fabrication demand,” the company said.
Refined silver supplies rose 1.5 percent to a record 981.6 million ounces in 2012, CPM said.
Mine supply increased, driven by expansion in Mexico, China, Peru and Australia, CPM said.
Fabrication demand fell 1.8 percent to 858.9 million ounces because of Europe’s recession and a drop in usage in India, CPM said.
Trading in silver futures and options on major exchanges, the London spot market and newly refined supplies fell 23 percent to 140.8 billion ounces from a record in 2011, CPM said.