Silver prices will end this year at a lower average than last year’s average of $31.15 per ounce, the Silver Institute said Wednesday.
“That expected decline will be largely due to the sell-off we’ve just seen in the last couple of weeks,” said Neil Meader, head of precious metals research and forecasts at London-based Thomson Reuters GFMS, which just completed the Silver Institute’s World Silver Survey 2013.
“Without that [recent silver price drop], the period average would have been that much higher. It just shows the damage that can be done by aggressive selling when the market is nervous and volume is thin.”
That sell-off has been extreme. Since April 9, when silver cost $23.63 per ounce, it has fallen 15 percent. That decline extends a more than three-month price decrease: Since Jan. 23, when silver was selling for $32.50, it has fallen about 27 percent. Gold, meanwhile, is down about 13 percent since April 9 and down about 18 percent since Jan. 23.
“Given the damage to both [silver and gold prices] that has been sustained in the recent corrections, it’s difficult to get completely optimistic about the scale of any potential rally,” Meader said.
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Despite the price declines, demand for silver coins are enjoying a global uptick in demand.
“Coins have made a very start of the year,” Meader said. “Silver eagles up about 40 percent. April appears set to stay at that level. If we can maintain those levels for rest of year we’ll be looking at a very strong year in terms of coinage.”
He also said coin minting in China last year soared 47 percent over the 2011 level.
The reason silver prices did well last year is because of “robust global silver investor demand,” the annual survey stated.
“Averaging $31.15 per ounce, 2012’s price level was the second highest on record, behind the average reached in 2011,” the survey said. “While last year was a volatile year for most precious metals, globally, silver investment rose to a total of 252.7 million troy ounces. That figure represents approximately $8 billion in a net basis, substantially above the annual average of $1.2 billion over the 2001-10 time frame.”
Investors remained significant net buyers of silver last year, the survey said, as evidenced by the 21 percent increase in implied net silver investment, which includes physical bar investment, exchange traded funds and fund activity on the Comex, to set an all-time high of 160 million ounces. By comparison, in 2004, the level of implied net silver investment was 5.4 million ounces.