Silver has been pegged as being the investment of the coming decade and its rising price during 2011 tends to support that theory, especially when it came within a hair’s breadth of meeting the all-time silver price high of US$50.00 an ounce set in January 1980. As it stands the average price during 2011 of US$35.12 was more than double its price during 2009. In 2010 the average price of silver reached US$20.19.
As the markets dealt with a staggering US economy, less growth in China than predicted and the continuing Euro-zone sovereign debt crisis silver performed its traditional role as an investors safe haven and as a result global silver investment jumped by some 70% in value to almost US$10 billion.
The investment climate for silver remains strong for the immediate future with luminaries like Eric Sprott of Sprott Asset Management calling it the investment of the coming decade. A Citigroup Technical Analysis released in late July 2011, stated that based on prior market performance, the price of silver may come close to US$100 an ounce. During 2012, Jim Rogers, the fabled financier who co-founded Quantum Fund with George Soros has said that if he had to buy only one precious metal it would be silver.
During 2011 the global silver supply dropped slightly, 3%, from 1,074.7 Moz in 2010 to 1,040.6 Moz in 2011. The major factor behind this was a fall in government sales from 44.2 Moz in 2010 to 11.6 Moz in 2011, and a drop in producer hedging from 50.4 Moz in 2010 to 10.7 in 2011.
As the economy staggered along in 2011 demand for silver in every fabrication sector fell, except for coins and medals where it rose from 99.4 Moz in 2010 to 118.2 Moz in 2011. As a result, total fabrication demand for silver fell by 1.5% in 2011 to 876.6 Moz, from, 890.1 Moz in 2010. The rise in coin and medal demand is driven by investment.
Silver comes from a variety of sources. It is mined for itself and it is also the by-product of gold, lead and zinc production. National governments sell silver reserves, producers sell amounts that have been kept for hedging and there is silver recovered from scrap, mostly from melted silverware, coins and industrial recycling.
The top five silver producing countries in 2011 were Mexico with 152.8 Moz, Peru with 109.8 Moz, China with 103.9 Moz, Australia with 55.2 Moz and Chile with 42.1 Moz. While silver is produced in many countries the leading producers are Mexico and Peru, its main markets are the Comex in New York, mainly a futures and options market preoccupied with fund activity and the London Bullion Market. The London market is the main market for OTC trading and the physical bullion market and it is in London that the daily reference price for silver, known as the fix, is set.
Most silver is a by-product of mining other minerals and during 2011 silver produced as a by-product from mining gold, lead, zinc and copper remained relatively stable, with silver as a by-product of gold rising 1% to 13% of overall production and silver as a by-product of lead and zinc rising by 1% to 37%. Against this silver production from primary silver mines dropped by 1% and primary silver mining totalled 29% of all mined silver.
Slightly more than half of mined silver production takes place in The Americas, with six out of the ten largest producing countries being in the hemisphere. Because 70% of all silver mined is a by-product of other mining activity the price of silver most acutely affects primary silver producers.