Silver prices seen strong in 2011 as demand, output grow

Silver prices are seen maintaining more than three-decade highs even as new mine output of silver is forecast to rise 8 per cent for a year ago to 800 million ounces in 2011, keeping up with expected growing demand, metals consultancy GFMS said on Wednesday. A recovery in industrial demand for silver, record US coin sales, strong investment demand for silver-backed exchange traded funds, and a surge in demand from mining companies to borrow the metal for hedge programmes have led to a squeeze in the physical silver market recently.    

Silver prices hit 31-year highs around $34 an ounce earlier this week and Walker said the average silver price for 2011 could range 40-50 percent higher than the average in 2010, although it still well below its all-time high near $50 set on January 18, 1980. "It could rise higher than $35 ... $40 is not an impossibility this year if gold performs incredibly well, and drags silver higher. But the question is, how long will it remain there?" Paul Walker, GFMS's chief executive officer, told Reuters in an interview. "We are expecting a reasonably robust increase (in new mine output) this year. The rise in mine output should keep silver still in a surplus."