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Silver Demand To Drop 6.7% In 2014- GFMS

By Debbie Carlson of Kitco News
Thursday November 19, 2014 7:49 AM

(Kitco News) - Total physical silver demand is seen down 6.7% in 2014 because of a weak first half of the year in most sectors, said Thomson Reuters GFMS late Tuesday.

Industrial demand was forecast down 1.8%, with jewelry seen down 4.4% and silverware down 6.3%, the group said in a report, released on the behalf of the Silver Institute. Thrifting continues to affect silver demand in electronics use, and some retailers pushed gold jewelry this year after gold’s price drop. Additionally, a harmonization tax in Europe during January caused silver to become much more costly for retail investors. That led to lower demand until the recent slide in silver prices, they said.

Average silver prices year-to-date are down nearly 20%, with the London Bullion Market Association Silver Price reaching a multi-year low on Nov. 6 of $15.28 an ounce, although it has rebounded slightly since.

Thomson Reuters GFMS forecasts full-year prices to average $19, a 20.1% decline from 2013’s average of $23.79.

The recent price slump spurred demand for silver coins, as seen by strong demand for U.S. Mint coins. Earlier in the month the Mint halted sales of its 2014-dated American Eagle coins because of strong demand, but restarted selling them on an allocated basis.

GFMS also noted sharp demand for silver bars and coins recent weeks, citing “bargain hunting (as) retail investors returned to the silver market after a disappointing first half of the year.”

The group cited strong Indian silver imports, which are up by 14% year-over-year for the January-to-October period and set for an annual record.

“With imports in the first 10 months totaling a massive 169 million ounces, many vaults in the U.K., traditionally the largest supplier to India, have seen significant drawdowns, leading to more supply flowing from China and Russia,” they said.

Holdings in silver exchange-traded funds remain high, they said. Total holdings peaked at 660 million ounces in late September 2014, but remain at 650 million ounces as of mid-November, which is a year-to-date increase of 17 million ounces, or 3%. That compares to total holdings in gold ETFs of 1,682 metric tons, which are down more than 1,000 metric tons since their peak and are down 8% year-to-date, they added.

Mine supply is forecast to reach a record in 2014, with output from Guatemala, Mexico, Chile and Peru rising. Mine supply is seen up 3.5% to 868 million ounces. Scrap supply, however, is expected to fall by 14%, they said. Even with the decline in secondary supply, total supplies will rise 2.9% year-over-year, to 1.131 billion ounces.

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By Debbie Carlson of Kitco News; dcarlson@kitco.com
Follow me on Twitter @dcarlsonkitco



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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