SUBSCRIBEGold:Silver Ratio Changes Course on Rising Physical Silver Demand
January 10, 2012 |
Although the World Gold Council thinks global gold investment demand in 2011 rose 33% yr/yr, the Silver Institute says investment demand for silver probably increased 66%. Those projections are further backed by evidence of increasing physical demand, which pushed silver coin sales across the world to record levels. The U.S. Mint, for instance, sold 15% more American Eagle silver bullion coins in 2011. That may not seem like much, but 2010 was also a record year for silver coin sales. By comparison, gold American Eagle coin sales were actually down about 18% in 2011 (in terms of total ounces, not number of coins). As we reported back in July, Australia's Perth Mint's silver coin sales from January to June alone were 66% higher than all of 2010, and in September, the Mint said sales were still at "unprecedented levels." Australian gold coin sales, however, were not nearly as high.
Silver bullion sales in Asia were equally robust. Deterred by high gold prices this year, Indians, the world's top precious metals consumers and importers, have largely shifted their focus to silver. During India's precious metals buying season at the end of October, dealers noted lackluster gold consumption, but dramatically increased interest in silver bullion. The Bombay Bullion Association recently said Q4 2011 gold imports fell 56%, but Q4 silver imports could have jumped as much as 50% yr/yr.
Notwithstanding numerous reports and analyses that point out waning demand from China, the world's second largest precious metals consumer base, bullion dealers there say that interest remains high. Over the summer, the People's Bank of China (PBOC) even increased silver coin production to 6 M oz. from 1.5 M oz. in 2010 due to rising demand, as a correction in China's housing market has led an even greater number of investors to pull capital out of the housing market and into silver bullion. Furthermore, China's precious metals buying season still lies ahead--so demand is likely to pick up prior to Chinese New Year festivities (January 23 to February 6).
Just like last year, silver prices are attractive enough to spur considerable interest among Chinese buyers, which could be enough to lift prices beyond $49.50. Such a dramatic rise will help adjust the gold:silver ratio to a level that more accurately reflects precious metals investors' growing preference for silver.
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