Barclays Forecast Tarnished Outlook for Silver, Base Metals Less Volatile

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The analysts projected "continued industrial demand growth-albeit at a slower rate" for silver, while other forms of demand are likely to remain on their downtrend while mine supply should rapidly accelerate

In their latest Commodity Investor report, Barclays Capital forecast a "tarnished outlook" for silver this year, asserting that "silver's fundamentals appear to be the weakest within the precious metals complex."

As the major earthquake in China's Sichuan Province renewed concern about base metals supply, Barclays' analysts said they felt power shortages and logistical difficulties posed a much greater risk to base metals production.

Meanwhile, Barclays forecast platinum prices will average $2,100 for the second quarter "as platinum supplies are heavily dependent on South Africa and the delicate power supply situation as well as mine safety concerns leave mine output extremely susceptible to potential disruptions."

The analysts projected "continued industrial demand growth-albeit at a slower rate" for silver, while other forms of demand are likely to remain on their downtrend while mine supply should rapidly accelerate.

"Six years of robust growth have been primarily fuelled by demand from India, China and the U.S., particularly on the back of strong demand from electrical and electronics sub-sector," the analysts noted. "However, this year, although we expect continue growth in industrial applications, we do not expect that growth to significantly outpace the anticipated decline in other sectors.

"This year we expect overall fabrication demand to be mostly unchanged. By contract we expect the growth in mine supply to remain particularly robust."

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