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Our Bureau

Mumbai , Nov 15

HIGHER fabrication demand due to growth in industrial requirement as also jewellery and silverware, slowing mine production, lower government and scrap sales, and recent resurgence in investment and speculative interest have combined to give the silver market strong support for prices.

Under current market conditions there is strong support for prices in the $6.80-$6.90s levels, especially due to industrial and Indian buying, the GFMS Ltd, international precious metals consultancy, said in a recent presentation.

However, the floor price and demand could be undermined by any significant slowdown in world GDP or industrial production growth, the agency has warned.

In 2006, supply is expected to be stable with little scope for a shock from higher mine production, scrap or government sales. However, currently there does exist the risk of correction back to the $7-plus because of possible liquidation of speculative long position.

Notwithstanding this, core investor interest continues to be solid and is unlikely to fall unless prices decline sharply.

GFMS pointed out that correction in base metal prices would be a negative for silver, but this could be more than offset by gold rallying to the $500/oz level because of silver's historical correlation closer to gold than other metals such as copper.

From the prevailing levels, GFMS sees more upside than downside in 2006.

Fabrication demand this year is seen higher in India. Indian demand has recovered strongly in 2005 from a weak 2004 level, GFMS remarked, adding that Indian silver bullion imports have surged on dips below $7.00/oz.

In the first nine months of the current calendar, Indian imports are estimated to have doubled to over 90 million ounces.

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