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Bullish Forecasts in Silver Market Despite Weak Demand from China

Posted on 2012-11-05, By A-Best Staff
By Adam Currie — Exclusive to Silver Investing News

Bullish Forecasts in Silver Market Despite Weak Demand from China

Silver markets showed relative stability over the week, still buoyed by news of the Greek bailout. While the dangerous symptoms of the debt crisis in Europe have retreated, the crisis itself seems to have been temporarily contained.

The metal traded within the $33 to $34 per ounce range for the majority of the period, closing higher on the COMEX at $35.56, up 3.80 percent.

This rally has led to some rather bullish forecasts within the market, with both analysts and speculators forecasting that the metal is long overdue for a notable price surge.

A market on the rise

In a recent interview, Gavin Thomas, Managing Director and CEO of Kingsgate Consolidated Ltd. (ASX:KCN), voiced his bullish silver sentiment, stating  “Silver is a fantastic opportunity…I see there’s a lot of upward price [for the metal], because of the lack of supply.” He added that silver could rise to $50 per ounce over the next 24 months.

Thomas noted that the supply of silver is under increasing pressure as lead and zinc mining, of which silver is a by-product, become less prolific.

Greg McCoach, President of AmeriGold and publisher of the Mining Speculator newsletter, also believes that a tight supply is a good indicator for silver, commenting “There’s a lot of explosive upside in silver and when you understand how tight the silver market is right now, and all the game-playing that’s been going on and the monster short position that exists, there’s not enough physical metal in the world to cover this.”

McCoach explained that there is “a total disconnect in [the silver] market that, at some point, when it is allowed to become a free market,” will “run like crazy.” He sees that time coming very soon.

China’s weak silver demand

Looking towards emerging markets as a yardstick, Walter de Wet, strategist in London for South African bullion and investment bank Standard Bank, warned that while industrial silver demand from these markets was strong in 2011, China’s new demand for silver “is not very strong at the moment.”

Standard Bank argued that Chinese warehouses currently hold enough silver to meet the country’s industrial demand for 15 months, having risen sharply from the surplus of twelve months’ worth in 2011.

Not all about China

While analyst attention seems primarily focused on China, another of the world’s developing powerhouses might very well be dictating the direction in which prices move over the medium to long-term.

India’s silver imports may top 5,000 metric tons in 2012 due to strong investment demand, according to Prithviraj Kothari, president of the Bombay Bullion Association.

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