Strong silver investment in 2011 paved the way to a record annual average silver price in a year marked by steep price volatility while retail silver investment demand for both physical bullion bars and coins & medals surged to record levels.
Silver posted an annual average price of $35.12 in 2011, more than double the $14.67 annual average price achieved in 2009. This offers further testament to investors’ enthusiasm for the metal as silver World Investment (including implied net investment, silver bars and coins & medals) produced another historic high total last year of 282.2 million ounces (Moz), the equivalent of approximately $10 billion on a net basis, itself a record high.
Physical silver bar investment grew by a massive 67 percent in 2011 to 95.7 Moz, while global coins & medals fabrication rose by almost 19 percent to an all-time high of 118.2 Moz. Western Europe and the United States, which bested 2010’s record performance in terms of American Silver Eagle Bullion Coin sales, led this category to its record high. Elsewhere, strong demand in China accounted for a near 60 percent rise in its bullion coin output in 2011.
Global silver ETFs holdings in general proved to be quite resilient in 2011, with a relatively modest drop of 4 percent to 576.1 Moz at end-2011, in spite of marked volatility in investor trading elsewhere. In particular, even though 2011 saw a notable growth of 53 percent in Comex silver futures turnover (in terms of the annual average), net long positions on Comex ended in 2011 down 73 percent.
In 2012 robust global silver investor demand was the dominant driver of silver prices, accounting for almost a quarter of total silver demand. Averaging $31.15 per ounce, 2012 was the second highest price level on record, behind the average reached in 2011. While 2012 was a volatile year for most precious metals, globally, silver investment rose to a total of 252.7 million troy ounces (Moz). That figure represents approximately $8 billion on a net basis, substantially above the annual average of $1.2 billion over the 2001-2010 timeframe.
Investors remained significant net buyers of silver in 2012, as evidenced by the 21 percent increase in implied net silver investment (which includes physical bar investment, exchange traded funds and fund activity on Comex) to set an all-time high of 160.0 Moz. By comparison, in 2004, the level of implied net silver investment was 5.4 Moz.
Global silver ETF demand was robust, up by 55.1 Moz in 2012 hitting a historic high of 631.4 Moz. Total ETF holdings rose to a record $18.9 billion at year-end, up 16 percent from the figure recorded at year-end 2011.
Buoyant investor interest was also seen in demand for coins & medals at 92.7 Moz in 2012, the third highest level ever recorded. Coin minting in China posted a strong increase realizing a 47 percent gain over 2011.
In 2013, total identifiable investment demand, which includes physical bar investment, coins and exchange traded funds (ETF) inventories, rose by 27 percent to a three-year high at 247.2 Moz. The growth was driven principally by a strong rise in retail purchases of silver bars and coins. Demand for physical bullion bars more than doubled in 2013 to reach a high of 127.2 Moz, while purchases of silver coins and medals rose 38 percent to a record 118.5 Moz. ETF holdings showed only modest growth in 2013. The average price of silver for 2013 was 23.79.
In 2014, silver coin and bar purchases remained at historically high levels, primarily due to growth in silver coin demand in several key markets. Growth was experienced in the United States, Canada, India and Spain. Silver coins and medals demand was 107.6 Moz last year.
Holdings by silver-backed exchange traded funds remained sturdy, growing by 1.4 Moz, to record their highest year-end level at 636 Moz. In contrast, gold ETF holdings ended 2014 at 53.1 Moz, 8.8 percent lower than their year-end 2013.
Identifiable investment, which includes physical bar investment, coins and medals, and exchange traded product (ETP) build, climbed 16 percent to a near record high in 2015. Silver coin and bar investment surged 24 percent to reach 292.3 Moz, the highest annual demand level in GFMS’ records, overtaking the previous high in 2013. Coin and bar demand accounted for 25 percent of total physical demand in 2015, the highest market share on record and up from just 5 percent a decade earlier. Silver coin and medal demand amounted to 134.1 Moz of demand last year due to unprecedented growth in several key markets, notably the United States and India.
Holdings in silver-backed ETPs declined by 17.7 Moz in 2015, finishing the year at 617.8 Moz. However, demand in this investment category has rebounded with ETPs reaching 640.0 Moz at the end of the first quarter 2016.
An extremely challenging year for nearly all commodities, along with a continued slowdown in Chinese economic growth and a stronger U.S. dollar, led to a lower average annual silver price of US$15.68/oz in 2015. However, this lower price environment helped to boost physical demand, particularly as long term investors viewed lower prices as key entry points in expectation of future price appreciation.