COMMENTARY — Steady as she goes, for silver

Silver prices will remain stable over the next six months, trading at between US$5 and US$5.50 per oz., says Gold Fields Mineral Services.

According to the British-based firm, demand is outstripping supply, and most of the increased demand is related to applications.

The price stability is a reflection of several factors:

• The annual deficit between supply (from mine production and scrap) and demand (for fabrication) is expected to rise to around 11 million oz. in 1999.
• World mine production is forecast to increase by nearly 570 million oz. this year, as increased output from Australia and Peru offsets lower production in Mexico.
• Scrap supply will be down this year from 1998’s high of 190 million oz.
• World fabrication demand is forecast to rise by almost 3% over last year. The lower price, combined with growth in gross domestic product worldwide, has boosted silver offtake.
• Much of the growth in fabrication is coming from industrial uses, in particular the booming electronics sector.
• Silver use in photography is increasing in all categories, despite some impact from digital technologies.
• Demand for jewelry and silverware is up this year in most countries (the chief exception being India).

The deficit in the silver market is being filled by a further decline in the level of bullion inventories. Nonetheless, identified private stocks of silver held on the Commodity Exchange of New York and in European dealer’s vaults did not fall during the first 10 months of the year.