Growing economy "will help" 2014 silver demand, but higher price "requires investment"...
SILVER DEMAND in 2014 is likely to be "helped" by continued recovery in the global economy, says a leading analyst, but the price will continue to rely on investment if it's to move higher.
"A recovering global economy will help boost silver demand," writes Dr.David Jollie, precious metals analyst at Japanese trading house Mitsui. But while "economic growth is certainly positive for silver, [it] is unlikely to be enough to drive significant price strength alone."
Some 50% of annual world silver demand
comes from industrial use, notably photovoltaics and as a catalyst in chemicals production led by ethylene oxide.
Exchange-traded trust funds holding silver attracted steady investment during 2013 despite the 38% drop in prices. But speculative betting on higher silver prices
through US futures contracts "is sharply lower at the start of 2014 than it was at the beginning of last year," notes Jollie, barely half the size of January 2013 when calculated net of the bearish bets also held by hedge funds and other money managers.
The US Mint announced last week that their gold and silver Eagle coin sales were down nearly 29% for the month of January from the first month of 2013. It was the weakest January for silver Eagle coin sales since 2010.
"Unless or until renewed investor interest surfaces," writes Jollie separately in the London Bullion Market Association's 2014 forecast competition
, "we are almost neutral," adding to Mitsui clients that he is "least optimistic" on silver compared to other precious metals.
On average, analysts taking part in the LBMA contest see the silver price averaging $19.95 this year, down from 2013's average of $23.79.
South Africa's Standard Bank – whose commodities unit is being taken over by China's giant ICBC bank
– also notes that stockpiles of silver in China "remain high [because] the country is not responding to lower prices" by raising import demand.
Looking at industrial silver demand, it is "still being negatively affected by price-driven thrifting," Mitsui's Jollie goes on, pointing to the drive to reduce the quantities of silver sparked by its surge to 30-year highs in 2011. But with low gold prices likely to cap new mining output, and so dampen growth in silver mining – which is foremost a byproduct of other mineral extraction – Jollie's peak silver price forecast for 2014 is the second-highest amongst the 25 analysts taking part in the LBMA competition at $26.35 per ounce.
Last year's winner, René Hochreiter of South African consultancy Allan Hochreiter, predicts a trading range from $12 to $23 per ounce, with a 2014 average of $17.
Any further falls in the silver price "may [see an] increase" in industrial demand, he believes. But disinvestment may [also] increase in 2014."