Silver prices surged in 2007 to highs not seen since January 1981, according to the 2008 Silver Yearbook, which was released Tuesday evening.
Prices have risen consistently since making a low of $4.028 on Nov. 26, 2001, according to the 185-page report published by CMP Group. This price reflects continued strong investor appetites for silver. Last year was the second consecutive year that investors were net buyers of silver, after many years of being net sellers.
Investors worldwide have turned to silver because of silver’s financial properties as a hedge against political, economic, and financial problems and uncertainties, according to the report. Silver’s supply and demand fundamentals also have been supportive of prices. A strong world economy has helped increase fabrication demand over the past couple of years even in the face of rising prices. Prices have risen overall amid a backdrop of a broader move into commodities investments by investors worldwide.
This year prices reached levels not seen since October 1980. The highest silver price this year to date was $20.785, reached on March 5, basis the nearby active Comex contract. The highest intraday high to date in 2008 was $21.44 on March 17. Net investor buying is projected to keep silver prices strong this year, although a period of seasonal price weakness is anticipated during the second and third quarters. Higher prices are expected later in 2008 and early 2009.
On a net basis, investors are estimated to have purchased 60.8 million ounces last year, slightly lower than the 65.5 million ounces they are estimated to have purchased in 2006. This year is projected to see a third consecutive year of net buying by investors, with investors buying a projected 74.9 million ounces.
Total silver supply reached 784.8 million ounces last year, an increase of 0.2 percent from the previous year. Supply from mine production last year totaled 533.7 million ounces, an increase of 4.1 percent from 2006, while secondary supply declined slightly to 243.1 million ounces, down 0.6 percent from 2006 levels.
Silver from government disposals provided 8 million ounces to total supply, residual of sales by the Reserve Bank of India during 2005 and 2006. This year total supply is projected to increase 3.9 percent to 815.1 million ounces. Mine production could rise 4.4 percent to reach 557.4 million ounces. Secondary supply meanwhile could rise to 257.7 million ounces, an increase of 6 percent from last year. There are not expected to be any significant sales of silver from government inventories, which have dwindled to low levels around 55.7 million ounces over the past four decades.
Last year fabrication demand increased 0.9 percent to 724 million ounces. Demand for silver use in jewelry, silverware, electronics, and batteries increased. Silver use in photography meanwhile continued to decline, totaling 169.5 million ounces last year. Demand for silver use in other fabricated products also declined last year.
In 2008 fabrication demand is projected to rise a modest 2.2 percent to 740.2 million ounces. Demand in most sectors is projected to increase, with the exception of silver use in photography.
Silver use in total has been relatively weak over the past decade. Demand rose 4.5 percent in 2000. Since that time total fabrication demand on an annual basis has either been very low, or demand has contracted. This year’s projected 2.2 percent increase in demand would be the strongest growth rate since 2000, when silver fabrication demand peak at 852.3 million ounces.
CPM Group’s 2008 Silver Yearbook is available in printed and/or PDF format for $75.00. Available from CPM Group. 30 Broad St., 37th Floor. New York, NY 10004 Tel. 212-785-8320. Fax: 212-785-8325. email: email@example.com. The report may be ordered and downloaded online at www.cpmgroup.com.