Silver Physical Demand Forecast to Drop 6.7% in ’14: GFMS

Physical demand for silver will decline 6.7 percent this year, driven by a slump in coins and bars, as prices headed for the second straight yearly decline, Thomson Reuters GFMS said.

Consumption will fall to about 1 billion ounces from 1.08 billion in 2013, according to a Thomson Reuters GFMS report released today on behalf of the Washington-based Silver Institute.

Silver futures have dropped 16 percent this year after plunging 36 percent in 2013. The Federal Reserve last month announced it would end its economic stimulus after gains in the labor market, damping demand for the metal as an inflation hedge. The price slump in 2014 helped boost physical demand with the U.S. Mint this month halting sales of American Eagle silver coins for more than a week after running out. In early November, coins sales surged to 1.26 million ounces.

“You had stronger data from the U.S., and at the same time you had the Fed closing off its quantitative easing,” Andrew Leyland, manager of precious-metals demand at Thomson Reuters GFMS, said in a telephone interview. “The market is starting to rebalance itself a little bit, and probably 2015 will be a consolidation period for silver.”

This year, calculations for physical demand changed to include silver bars, Leyland said.

In 2014, coin and bar consumption will tumble 21 percent to 191.6 million ounces, while jewelry use will fall 4.4 percent to 189.2 million, according to the report.

Industrial fabrication, which includes silver used for electronics, brazing alloys and solders, electrical and photography, among other industrial uses, will drop 1.8 percent to 577.5 million.

Silver futures for December delivery gained 0.7 percent to $16.174 an ounce today on the Comex in New York.

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