April 11, 2019 / 1:17 PM / in 10 days

Indian demand surge drives silver consumption to three-year high

    By Peter Hobson
    LONDON, April 11 (Reuters) - Global silver demand rose 4
percent last year, chalking up its first increase since 2015
thanks to sharply higher consumption in India, with a supply
fall creating a small deficit, an industry report said on
Thursday.     
    The world consumed 1,033.5 million ounces in 2018, up from
998.4 million ounces in 2017, according to the Silver
Institute's World Silver Survey 2019, prepared by GFMS analysts
at Refinitiv.
    Driving the increase was India, where high gold prices
spurred many consumers and investors to switch to cheaper
silver, analyst Johann Wiebe said. 
    India's consumption of silver jewellery jumped 16 percent to
76.5 million ounces in 2018, which along with a rise in the
United States helped to push up overall jewellery demand by 4
percent to 212.5 million ounces.
    Purchases of silver investment bars in India, meanwhile,
surged by 160 percent to 69.4 million ounces, lifting global bar
and coin investment by 20 percent to 181.2 million ounces, Wiebe
said. 
    Use in electronics rose slightly, but efforts by solar panel
manufacturers to cut costs by reducing silver use dragged
industrial demand down 1 percent to 578.6 million ounces. 
    
    
        
    Supply of silver, meanwhile, dipped 3 percent to 1,004.3
million ounces owing to reduced mined and scrap output, leading
to a physical market deficit of 29.2 million ounces, the report
said. 
    Demand is likely to fall this year by about 1 percent, Wiebe
said, but would rise again in 2020 and 2021 as production of
solar panels picked up and U.S. coin sales expanded. 
    He said supply would rise by about 1 percent in 2019 before
falling again in the early 2020s. 
    Silver prices are affected by supply and demand but
heavily influenced by investors who often buy precious metals as
a perceived safe-haven asset during times of economic or
political uncertainty. 
    Wiebe said he expects rising economic and political
turbulence, along with a likely weakening of the dollar, to push
prices higher, with silver averaging $16.75 in 2019 and $17.50
in 2020. 
    A weaker dollar is supportive for silver, which is priced in
the U.S. currency, by making it cheaper for buyers outside the
United States. 
    Silver is currently trading around $15.25 an ounce. 
    It averaged $15.71/oz last year, down about 8 percent from
2017 and underperforming gold, which fell 1 percent to
average $1,268 last year. 
    
    SILVER SUPPLY AND DEMAND    
                              2017        2018    % change
 Mine production             876.9       855.7         -2%
 Scrap                       153.8       151.3         -2%
 Hedging                       1.9        -2.8            
 TOTAL SUPPLY              1,032.6     1,004.3         -3%
                                                          
 Jewellery                   204.5       212.5          4%
 Bar and coin                150.4       181.2         20%
 Silverware                   57.6        61.1          6%
 Industrial                  585.8       578.6         -1%
 TOTAL DEMAND                998.4     1,033.5          4%
    Source: Silver Institute World Silver Survey 2019, GFMS,
Refinitiv
    
    

    
 (Reporting by Peter Hobson
Editing by David Goodman)
  
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