At the yearly New York Silver Dinner organised by The Silver Institute, GFMS – a precious metals consultancy, specialising in research into the global gold, silver, platinum and palladium markets – presented its interim silver market review. The review highlighted that the total supply of silver is forecast to decline by around 4% this year, with modest growth expected in 2009. It also predicted mine production to rise moderately by some 171 t this year, with strong growth expected in Bolivia (+ 100% – San Cristobal), Russia (Kupol and Dukat), Argentina (Manantial Espejo) and in Mexico (including Alamo Dorado and Cerro San Pedro). These increases will be partially offset by declines in Australia, the United States and, significantly, Chile. It reported that continued growth in silver production is expected in 2009, with most of the gains coming from a full year of output at Kupol and San Bartolome (Bolivia) plus anticipated growth in Mexico, yet this rise will be lower than had been formerly projected.

The GFMS’ also commented on the price of silver and how this may develop over the next year. “For the first ten months of 2008, the silver price, basis the London fixing, averaged $15.93, up 21% year-on-year but down by 38% on an intra-year basis. Silver’s supply/demand fundamentals are expected to turn negative in 2009, largely due to a drop in fabrication demand. Taken in isolation this will be negative for the price. A growing ‘surplus’ between supply from mine production and scrap and fabrication demand means that more metal will have to be absorbed by investors. GFMS’ view is that this will take place and that this demand will also tend to drive prices up from prevailing $9-$10 levels. There are several reasons for expecting such an outcome: many longs have now been cleaned out; the US$ rally will be partly unwound; ‘de-leveraging’ will come to an end, and economic and financial problems will get worse. Silver – likely to be seen as ‘cheap’ on a ratio basis – will be helped higher by gold. In light of this, GFMS’ current base case price forecast for 2009 is for silver to average close to the $13 mark.”