The Hindu Business Line : Silver prices up on rising demand

WITH continuing structural deficit (gap between demand and supply) and increase in global demand, silver has been having a dream run for last several months now. Prices increased by a massive 46 per cent in the last one-year.

A stronger investor interest and improved fabrication demand scenario, which picked up in the third-quarter , propelled silver prices to $5.96 per ounce at the end of 2003, as compared with the year's average price of $4.88/oz, reflecting a 6 per cent increase over 2002.

Prices continued to move up in the current year too. The cumulative price average through April 2004 stood at $ 6.77/oz, a 66 per cent increase over the November 2001 low price of $ 4.05/oz.

Giving these facts, the World Silver Survey 2004, authored by Silver Institute and GFMS Ltd, said silver fabrication demand shot up in 2003 to 859.2 million ounces (Moz) and the 13.3 Moz gain over 2002 represented partial reversal of a two-year decline in demand.

Silver use in industrial applications experienced an increase of nearly 3 per cent to 351.2 Moz. "The main driver for the growth in industrial applications was an improving economic environment, a resurgent electronics sector and the dramatic 8 per cent increase in Chinese fabrication," the survey pointed out. Last year, China consumed a record 27.6 Moz of silver in industrial applications.

On the supply side, questioning whether China's silver trove is unlimited, the authors said any diminution of sales, or a flexible policy with regard to price would undoubtedly help silver's cause.