The increased value of silver has led to a decline in the fabrication of the precious metal for jewelry and other uses, according to an annual report released Monday.
Fabrication demand for silver in 2006 fell 11.5 percent to 714.7 million ounces in 2006 due to high prices for the precious metal, according to the report, The 2007 Silver Yearbook, published by the CPM Group. Declines were registered in silver use in jewelry and silverware, photographic use of silver, and the use of silver in other manufactured products. Demand rose in electronics.
Overall fabrication demand for silver is projected to fall an additional 1.4 percent in 2007, to 705.6 million ounces, according to the report. However, jewelry applications for the precious metal are expected to rise in 2007.
“Demand for silver in jewelry and silverware is projected to rise modestly this year, as silversmiths, jewelers, and consumers appear to have adjusted to the price increases to some extent,” according to the report.
Demand for silver in 2007 is expected to decline further in photographic uses and other industrial applications, while its use continues to rise in electronic applications and batteries.
The price of silver in 2006 rose from a low of $8.87 on Jan. 5 to a high for the year of $14.35, on May 11, according to the report. Silver prices averaged $11.61, up 58 percent from $7.35 in 2005. Silver prices have continued to be historically high into the second quarter of 2007, and rising back above $14 for a few days during April 2007. This rise in silver prices reflects a major shift in the role of investors in the silver market, according to the report.
“Investors are buying so much silver now that as a group investors emerged as net buyers of silver in 2006, for the first time since 1990,” according to the report. “The increased demand from investors, and the cessation of the flow of metal from investors, was strong enough to propel silver prices sharply higher in 2006. Furthermore, these trends are continuing in 2007, suggesting that silver prices may remain historically high.”
Total silver supply from mines, secondary recovery from scrap, and government disposals totaled 775.2 million ounces in 2006. This was virtually flat when compared with 2005 figures. Mine production declined 1.9 percent to 505.2 million ounces in 2006, while secondary recovery rose 7.9 percent to 244 million ounces. Total supply is projected to be flat again this year, rising just 0.5 percent to 778.8 million ounces. Mine production is projected to rise 3.1 percent to 520.8 million ounces, while secondary recovery is projected to rise 2.5 percent to 250 million ounces.