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There’s been a lot of excitement over the gold market lately. With bullion prices touching $1,300 this past week, for a gain of nearly 25 percent since the beginning of 2016.
But that performance has been overshadowed in recent weeks by another precious metal — silver, which has jumped 20 percent over the last month alone.
And news this week suggests there are strong fundamental reasons for silver’s outperformance.
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Industry body the Silver Institute reported yesterday on comprehensive supply and demand figures for 2015, finding that the metal had an unexpectedly buoyant year.
Silver demand came on strong last year, with overall use up 3.4 percent as compared to 2014, to 36,407 tonnes.
That was enough to set a yearly record for silver demand. Which shows that end users in the precious metals space are favouring gold’s “little brother”.
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The majority of increased demand in 2015 came from investors, with investment buying of coins and bars rising 24 percent, to 9,092 tonnes.
Silver use in the jewelry sector was also strong, as sales rose 1.1 percent to an all-time record of 7,045 tonnes.
Even as demand for silver surged, the new data from the Institute showed that supply is sagging. With the group saying that a 13.2 percent decline in recycled silver supply led to an overall decrease in yearly production — despite a 2.1 percent increase in mine supply for the year.
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Such falling supply, along with rising demand, put the silver market in deficit by 4,040 tonnes on the year, up 65 percent from the 2,445 tonne deficit seen in 2014.
2015 was in fact the third year running that global silver was in supply shortfall. Suggesting that if investment demand keeps up the way it appears to be in 2016, we could see some significant upward momentum in this market.
Watch for more figures on investment demand — and also recycled supply — to see if this trend will continue.
Here’s to the other gold,
By Dave Forest
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Dave is Managing Geologist of the Pierce Points Daily E-Letter.