By Frank Tang
NEW YORK (Reuters) - Demand for silver will post a 7 percent decline in 2014 because of a slower pace of buying by jewelers and industrial fabricators in the first three quarters of the year, metals consultant Thomson Reuters GFMS said on Tuesday.
Harmonized European sales tax rates that started in January have driven up retail silver investment product prices, reducing demand on the continent, the Thomson Reuters unit said in an interim market review.
Thomson Reuters GFMS said it expected total physical demand, which includes jewelry, coins and bars, silverware and industrial fabrication, to fall 6.7 percent to 1,004.5 million troy ounces (31,243.44 tonnes) in 2014 from a record high of 1,077 million ounces (33,498.44 tonnes) last year.
Silver industrial demand is forecast to drop 1.8 percent as the electronics sector keeps shifting to cheaper metals. Jewelry consumption should fall 4.4 percent because retailers are pushing more gold products to take advantage of lower bullion prices, GFMS said.
Also Read
For the full year, Thomson Reuters GFMS now forecasts silver prices to average $19 an ounce, a 20 percent decline from $23.79 in 2013.
On Tuesday, silver was up 0.4 percent at $16.17 an ounce.
"The demand is quite price inelastic on the physical fabrication side, so ultimately demand for over-the-counter small coin and bars and (ETF) investments plays a more important role," Andrew Leyland, manager of precious metal demand at Thomson Reuters GFMS, said before the release of the report.
Weak physical buying earlier this year, however, has more than offset a recent increase in investment demand after silver's price decline, Leyland said.
Demand for silver coins and bars has soared in the last 60 days as the price of the metal has fallen 15 percent. Sales of U.S. American Eagle silver bullion coins in October surged to nearly 6 million ounces, their highest since January 2013.
Thomson Reuters GFMS said strong silver investment demand was reflected in a 14 percent jump in imports to India for the first 10 months of 2014 from a year earlier.
Leyland said the current silver-to-gold ratio of 1:74, which measures how many ounces of silver an ounce of gold can buy, has prompted some investors to favor silver at gold's expense. The long-term average of the ratio is about 1:60, Leyland said.
(Reporting by Frank Tang; Editing by Lisa Von Ahn)
