* Silver ETPs show resilience to lower spot prices
* Demand from solar panel sector likely to slow
* Mine output at record levels last year
* Gold/silver ratio at highest since September 2010
By Clara Denina
LONDON, May 10 Silver prices swung wildly in the
wake of extreme losses seen in gold last month, but while
investors fled bullion-backed funds in droves, holdings in the
less glamorous precious metal are remarkably robust, for now.
Silver carries the precious and industrial metal tag due to
uses in jewellery and manufacturing, but its fundamental picture
is far from rosy.
The global market is in oversupply to the tune of some 4,000
tonnes in 2013, while industrial demand - accounting for some 50
percent of total usage - has been clipped by a slowing solar
panel sector, where high profile names such as China's Suntech
Power Holdings have fallen on hard times.
Prices plunged 14 percent in April, sparked by gold's
worst two day drop in 30 years, while the gold/silver
ratio is now around its highest level since September 2010 with
an ounce of gold currently buying 61 ounces of silver.
And yet holdings of silver-backed Exchange Traded Products
(ETPs) have emerged apparently in rude health.
Major asset manager BlackRock said approximately $18 billion
had been seen in outflows from gold ETPs, while silver holdings
have recorded $800 million of inflows.
"Investors held silver positions as they thought there was
going to be continued monetary expansion, which would lead to
strong economic growth," Macquarie analyst Matthew Turner said.
Such a scenario would be more beneficial for silver, Turner
said, because while economic expansion dents the safe-haven case
for gold bullion, it boosts prospects for silver's industrial
Global ETP assets under management were more than $3
trillion by the end of April with $106 billion, or five percent,
allocated to gold ETPs and $14 billion or 0.7 percent in silver
products, BlackRock data showed.
Credit Suisse saw how the silver ETP data could be given a
"Silver bulls could point to the ongoing accumulation in
the metal's ETFs as a justification for positive outlook, as in
the knowing investors are buying; it's only a matter of time for
the price to follow suit," Credit Suisse analyst Tom Kendall
said in a note.
BlackRock investment strategy director Ursula Marchioni said
however that the reality of silver's resilience could be due to
it simply lagging gold.
"If we look at why (silver) ETPs inflows are not going in
the same direction as prices, one reason is potentially a
time-lag situation, as gold is the headline these days and there
is a lot of momentum around it which hasn't been captured in
silver at all," she said.
Retail investment in silver, like bullion, has been strong
and exacerbated by April's price drop. Silver coin sales from
the U.S. Mint posted their strongest four months in at least 27
years in 2013 so far.
But that has failed to offset a fall in industrial demand.
While implied net investment rose by nearly 28 million ounces
last year, fabrication demand, which includes industrial usage,
silverware and coins, fell by more than twice that amount.
Mine supply also rose by another 30 million ounces to record
Growth in global solar panel demand, once seen as a key area
for silver use, will halve to nine percent this year from 18
percent in 2012, HSBC has said. Demand for silver from the solar
panel industry accounts around 10 percent of the metal's
"Due to over capacity and profitability issues in China's
solar panel industry, industrial demand for silver may decline
this year," HSBC analyst Howard Wen said.
Weak consumption from industrial users in the electronics
industry, terminal decline in the photography sector and
record-high supply are likely to continue to be features of the
silver market, which will ultimately take a toll on ETP
"Silver remains plagued by oversupply and the longer-term
bear market in gold will take silver prices lower," Societe
Generale analyst Robin Bhar said.