Silver demand seen rising in 2013 on industries, investment-GFMS

Wed Apr 24, 2013 8:30am EDT

* Bargain hunting lifts silver coins demand after sell-off

* Coin and medals buying this year could surpass 2011 record

* Silver fabrication demand down 7 pct in 2012

By Frank Tang

NEW YORK, April 24 (Reuters) - A pick-up in manufacturing activities and an overall improvement in the global economy should help silver's fabrication demand recover this year, respected precious metals research firm Thomson Reuters GFMS said in a report on Wednesday.

Strong buying of silver coins and bars by bargain hunters after a sharp price fall this month is expected to underpin investment demand, which may hit an all-time record, said Neil Meader, head of precious metals research and forecasts at Thomson Reuters GFMS.

"The fact that we have global growth accelerating into next year means we should get a relatively strong response from industrial demand," Meader told Reuters in a phone interview prior to the release of the firm's World Silver Survey on Wednesday.

Silver fabrication demand, which includes industrial applications, photography, jewelry, silverware and coins and medals, fell around 7 percent to 26,339 tonnes in 2012, the report showed.

Industrial applications fell 4.5 percent to 14,490 tonnes last year, while jewelry demand was down less than 1 percent year-on-year to 5,771 tonnes.

An increase in silver industrial demand will depend on the extent of economic recovery in Europe, offsetting losses in the photovoltaic sector as governments subsidize less on solar panel production, Meader said.

The United States and China by far consumed the most silver for industrial applications in 2012, the report showed.

Silver jewelry, the second largest demand component after industrial applications, should post decent growth this year as long as there is no major hike in silver prices, Meader said.

SILVER COIN DEMAND SOARS

An encouraging sign in the silver market so far in 2013 has been very strong demand in physical investment products such as coins, bars and silver exchange-traded funds.

Sales of U.S. Mint's American Eagle silver coins have been higher year to date compared with the same period last year, while holdings in top silver ETFs monitored by Reuters hovered near their all-time high set in March.

U.S. gold and silver coins have been flying off dealers' shelves this week as retail investors snapped up bargains since the metal's historic plunge in price.

The price of silver fell $5, or 20 percent, to $22 an ounce over a two-day period earlier this month, following gold's meltdown as investors liquidated bullish bets en masse after months of disappointment over the yellow metal.

Silver, whose price tends to be positively linked with that of gold, traded at around $23 an ounce on Tuesday.

"We see a lot of bargain hunting coming through in the wake of the recent price drop, so it's quite likely that we would see decent (silver coin) recovery in the calendar year 2013 in comparison to 2012," Meader said.

Demand for silver coins and medals fell 22 percent to 2,884 tonnes last year, down from a record level of 3,679.5 tonnes in 2011, when silver soared to a record high near $50 an ounce, only to fall back 30 percent in 10 days.

"If we stay on this track, silver coin and medals demand could be getting past the 2011 record," Meader said.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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