Silver Seen Lower by CPM as Short-Term Investors ‘Disillusioned’

Silver prices on average will decline for the third straight year as investors continue to move their money to equities and property, according to CPM Group.

The metal will average $20.37 an ounce this year, 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 2014.” That’s down 14 percent from $23.778, the 2013 average of futures in New York.

In 2013, investment demand fell 42 percent to 105.3 million ounces, the lowest since 2008, CPM said in a statement. Last year, futures tumbled 36 percent, the most in more than three decades. Some investors lost faith in the metal as a store of value amid a U.S. equity rally to a record and muted inflation.

“Shorter-term investors were primarily responsible for the weakness,” CPM said in the statement. They “were disillusioned by the inability of silver to rise strongly following the highs reached in 2011, and decided to move their funds into other asset classes like equities and real estate that were perceived as providing better profit opportunities,” the company said.

Global supplies this year will increase 0.7 percent to 977.6 million ounces, CPM said.

Refined silver supplies fell 2.4 percent to 971 million ounces in 2013 as sales of recycled metal dropped, the company said.

Mine supply increased 4.1 percent last year to a record 741 million ounces, driven by expansion in Mexico, China, and Peru, CPM said.

Fabrication demand rose 6.3 percent to 865.8 million ounces as the drop in prices drove jewelry purchases higher and usage of the metal in solar technology increased, the company said.

Through yesterday, silver futures rose 1.3 percent to $19.619 this year on the Comex after climbing as much as 15 percent. The U.S. is the top user.

In April 2011, the metal reached $49.845, the highest since 1980. The price climbed to a record $50.35 in January 1980 as the Hunt Brothers tried to corner the market.

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