Silver price rising on increased investment demand

According to CPM Group’s 2011 Silver Yearbook, investment demand was the main driver behind silver price increases in the past year. Total demand from investors in capital markets reached 142 million ounces, the third-highest level since the start of data recordings. Meanwhile, industry demand has also increased significantly, contributing to rising output from silver producers. Nevertheless, there was a large gap between new supply from mines and demand in 2010, which amounted to a total of 319 million ounces worldwide.

Although silver producers have increased their output by 33% since 1999, the rising supply has not helped to meet the growing demand in silver markets. While 667 million ounces of silver were produced in the past year, global demand reached 986 million ounces – a stunning gap of 319 million ounces. Record-high demand from the investment community has proven the main driver for the continuing silver price rally in 2010, with the white metal soaring to a peak of $50 per ounce in the beginning of May this year. Investors are buying silver in order to hedge against continuing currency depreciation. Furthermore, investors’ capital flight to the silver sector – comparable to the situation in the gold sector – seems to also to be driven by increasing fears of inflation.

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via Silver price rising on increased investment demand.

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