Silver: Decisive Upside Breakout Forecast

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". . .fair chance that 2008's London-high of $20.92 will be exceeded."

GFMS' short-term forecast for silver "is that through to July silver will trade between $16.40$19.50, broadly shadowing gold," GFMS Chairman Philip Klapwijk predicted today.

In a presentation of "The World Silver Survey 2010" Thursday morning to the Silver Institute in NYC, Klapwijk predicted that before year-end, "a more decisive breakout to the upside is probable, with a fair chance that 2008's London-high of $20.92 will be exceeded."

The "World Silver Survey 2010" noted that, in spite of a strong rally in silver prices last year, "the annual average price in 2009 fell for the first time since 2001, slipping 2% to $14.67."

"Despite the significance of the supply/demand fundamentals, we would still regard investment as the prime driver of silver prices last year, with the steady gains for the silver ETFs and the more volatile upward path in the net investor long on Comex both being critical," GFMS said.

Demand

The World Silver Survey noted that tough economic times took their toll on 2009 silver industrial fabrication, which sharply dropped 20.6% to a six-year low of 352.2 million ounces (Moz.). Total global silver fabrication demand dropped 11.9% in 2009 to a 17-year low of 729.8 Moz.

Klapwijk said all regions except the Indian sub-continent "suffered double-digit losses, with the heaviest in percentage and absolute terms being East Asia's." He noted the loss was apparent in most sectors of end use, though some continue to show growth.

Nevertheless, GFMS forecasts "a strong recovery" for industrial silver demand this year, "reflecting stock replenishment and higher GDP growth."

Mine Supply

Mine production was up 4% in 2009, reaching a new record of 706.9 Moz. of silver. Primary silver mine supply was significantly higher, while silver as a byproduct of gold mining increased 21% to 15.2 Moz.

However, primary silver supply is anticipated to only increase marginally this year. . .with an estimated 25% increase in silver production.

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