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RAPAPORT... Silver prices in the first 10 months of 2013 have averaged $24.51 per ounce, nearly a 21 percent year-on-year decline, according to the Thomson Reuters GFMS Interim Silver Market Review, and GFMS is forecasting a full year average price even lower at $24.24 per ounce. GFMS noted that silver's characteristics sometimes shadow the developments impacting gold and it also takes cues from the industrial world, both trends which are expected to continue in 2014. Gold has lost about 25 percent year on year and trading at $1,288.50 per ounce on November 15. The interim report from Thomson Reuters GFMS concluded that silver fabrication demand will grow 6 percent year on year both for the jewelry sector and the silverware market this year. Jewelry demand has been particularly strong in emerging countries, with demand surging in India as consumers have dramatically pulled away from buying gold. GFMS explained that much of silver's price decline this year was driven by factors similarly influencing the gold market and triggered by expectations that the U.S. Federal Reserve would taper back its $85 billion monthly bond and mortgage backed securities purchases. This, alongside an expectation of more attractive returns in other asset classes, prompted investors to engage in sector rotation trades away from safe haven commodities toward equities and bonds, the report noted. By comparison, GFMS stated that gold exchange-traded fund (ETF) outflows have been in place all year, but silver ETF holdings continued to grow, reaching a record-high of 655 million ounces on October 31. Silver mine production is poised to grow by 4 percent this year to 815 million ounces, with growth in production primarily coming from the U.S., Mexico and the Dominican Republic. GFMS estimates the average cash costs for mining silver is $9.50 per ounce, up from $8.90 per ounce in 2012. GFMS also forecasts 35 million ounces of net producer de-hedging in 2013 as companies allowed contracts to mature or actively bought hedges back.
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