Silver Prices Should Remain Well into Double-Digits in '09 - GFMS

In a report prepared for the Silver Institute, GFMS forecasts that silver prices should remain well into the double-digit levels for the remainder of this year.

"Growth in investment compensating for the not inconsiderable headwinds stemming from a weakness in fabrication demand as a result of the synchronized global economic downturn that is currently taking place," GFMS suggests, may result in a volatile market.

Nevertheless, the metal will continue to trade this year "at what are historically high levels," GFMS added.

The future of silver investment will continue to be intertwined with that of gold. "Based on the strong link between gold and silver, GFMS is confident that silver investment demand will remain positive through most of 2009 though there will be some swings in investors' positions and in silver prices," according to GFMS analysis.

The precious metals analysts also suggest there is some scope for the expansion of silver ETFs to other western markets, as well as across the developing world. "Namely, rising incomes, demand for inflation hedging production, the recent downturn in equity markets and spill over from, the gold market and success of its ETF products on global stock exchanges could make way for the expansion of silver ETFs to other exchanges. . .for instance, ones based in India, where gold ETFs are already available, or in China."

However, GFMS cautioned, "one potentially limiting factor, in terms of launching new silver ETFs might be the relative lack of a local tradition in investing in silver, compared with gold (East Asia being one example), in some prospective markets that might be considered for these products."

"That said, the underperformance of traditional investments may also fuel demand for the metal," GFMS advised. Silver and other precious metals are proving to be popular alternatives in times of financial market turmoil.

"As such, silver's recent impressive track record in gains is likely to attract rising inflows and boost demand for silver ETFs in world markets."

One of the report's major conclusions is that ETF investment demand and direct purchases of silver bars and coins "will increase sufficiently to offset a fall in industrial demand," a Silver Institute news release said Wednesday.