The bull run in precious metal prices is likely to continue next year with scrap availability and government sales remaining low.
GFMS forecast gold prices to peak above $1,500 an ounce and silver to trade higher than $30 an ounce in 2011.
Assuming the forecast holds good, as has been in the past, gold and silver prices will be at Rs 22,500 per 10 gm and Rs 42,000 a kg respectively. During the third quarter of the current calendar year, average gold prices were up 44 per cent in dollar term and 105 per cent in rupee term.
On Thursday, gold was traded at $1356.1 an ounce and silver at $26.46 an ounce in London, while the two precious metals were quoted at Rs 20,042 per 10 gm and Rs 40,044 a kg respectively in Mumbai. For 2010, however, the average price of silver is expected to remain at $19.94 an ounce — a rise of 36 per cent from the previous year.
“Investment demand has been very strong in gold and silver which also gets support from price-insensitivity in the short run of most fabrication. Thus, the overall demand is expected to pick up next year,” said Philip Klapwijk, chairman of GFMS, during ‘The Silver Market in 2010’ note on Thursday.
Klapwijk said silver’s fabrication demand forecast is to be around 10 per cent higher in 2010 than last year. Industrial offtake is expected to recover by more than 65 million ounce (Moz) for 2010, or 18 per cent. In 2011, growth forecast will ease to around 4 per cent.
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Photographic demand will continue to contract, mainly due to ongoing substitution by digital technology. Jewelry and silverware demand will decline marginally year-on on-year. Silver coin demand will continue to rise.
The supply side equation is equally promising. World silver mine production is expected to rise by 3 per cent y-o-y in 2010, lifted by strong output from gold by-product mines. Scrap supply forecast to rise by 11 per cent in 2010, despite a dip from the photographic sector. With a marginal increase in government sales, overall supply is expected to increase by around five per cent in 2010.