Positive outlook for silver stocks

Last week, the Silver Institute was addressed by Philip Klapwijk, the chairman of precious metals consultancy, GFMS.

He reported that investment demand for silver “has rebounded very strongly” in the fourth-quarter and that he expects silver stocks to increase “quite substantially” during 2007.

The market still sees the metal as more as a commodity and less of an investment than gold but despite its lack of monetary status silver Exchange Traded Funds (EFT) have performed well with ETF holdings increasing by 23 million ounces from January through to October of this year.

Looking to the future, GFMS believes that there will be more reliance on investment demand for silver over the next 12 months and is forecasting a price range of between $13.20 oz and $16.50 oz.

While investors have been driving silver prices higher, fabrication demand has also contributed to the trend.

However, forecasts of a global slowdown in 2008 could affect industrial demand.

Government sales of silver have reduced by almost one-half during 2007, with Russia the only country to have made significant sales.

Silver production is expected to increase by 23 million ounces (3.6%) this year, with higher output from La Coipa in Chile, initial output from San Cristobal in Bolivia, and higher production in Australia and Mexico.

A further rise is expected in 2008, with forecasts in the region of 7%.