According to figures from the Silver Institute, silver averaged $US14.67 an ounce in 2009 and rose to an average $20.19/oz last year, in line with historical highs.
 
It left silver commentators pondering its direction for 2011, with analysts tipping a rise over $30/oz for the first time.
 
The lowest point for spot silver this year was back in January, when it traded at $26.84/oz and despite some volatility, it was all uphill from there, with the metal not dipping below $30 from February right up until this month.
 
The precious metal hit its 2011 – and all-time – high in late April, when it closed at $48.56/oz on the Comex division of the New York Mercantile Exchange.
 
However, there were price plunges in early May and mid September.
 
Last month Thomson Reuters GFMS forecast the silver price would average $35.66/oz for the 2011 and that estimate should be pretty close.
 
Kitco’s average price for the year-to-date as of December 22 was $35.23/oz.
 
Higher prices are expected to lead to a 30% drop in producer hedging this year.
 
GFMS is predicting further strength for silver next year.
 
“The main driver of the price remains investment demand, which has absorbed the substantial market surplus – the difference between mine production and scrap and fabrication demand, excluding coins – that has characterised the silver market in 2011,” GFMS said in its interim silver market review.
 
Analysts are tipping the price to exceed $50/oz by the end of next year, averaging around $45/oz in 2012.
 
In terms of supply, GFMS is expecting it to remain stable this year before rising this year.
 
Mine production is tipped to grow by 4% this year with increases in output in Mexico, China and Russia offset by drops in Australia, Peru and the US.
 
GFMS expects fabrication and industrial demand to rise around 4% each in 2011, while coin minting is expected to jump 25%.
 
According to projections, world investment demand will total 278 million ounces this year, the second highest figure on record.
 
Although the number is below 2010’s all-time high, the higher price will lead to a record value.
 
GFMS said core fabrication demand should rise again next year but production and recycling will also increase.
 
“The resultant silver market surplus is expected to once again be absorbed by investors, as the investment case for silver remains in play,” it said.
 
“However, downside risks remain, including the potential for the sovereign debt crisis to precipitate a liquidity crunch, impacting the ‘real economy’.”
 
Mine production is tipped to grow by 4% this year with increases in output in Mexico, China and Russia offset by drops in Australia, Peru and the US.
 
Already home to the world’s largest silver mine – BHP Billiton’s Cannington – there are several projects set to boost Australia’s rankings among silver producing countries.
 
Alcyone Resources recommissioned the Texas silver project in Queensland, pouring its first bullion in June, followed by the first 100,000oz the following month.
 
The company has hedged 700,000oz of its 2012 production, around half, at $35.77/oz, to take advantage of the high prices.
 
The project was forecast to hit full production of 1.5-2Moz gold before the end of the year.
 
The next cab off the ranks is expected to be Cobar Consolidated’s Wonawinta project, which is set for commissioning in the March quarter.
 
Cobar expects the project to be Australia’s largest “pure silver” mine, producing 2.5Moz silver per annum over an initial five-year mine life.
 
The company has also forward-sold 1.8Moz at $31.87/oz.
 
Other additions to Australian silver production over the next 12 months are expected to come from Evolution Mining’s Mt Carlton gold-silver project, which is due for commissioning in the second half of next year.
 
Argent Minerals is completing a definitive feasibility study on its Kempfield property while Silver Mines is carrying out a prefeasibility study at its Webbs project, both in New South Wales.
 
Offshore, PanAust’s Ban Houayxai gold-silver project in Laos will be commissioned in March, while G-Resources Martabe project will enter production in the first quarter.
 
On a larger scale, Barrick Gold’s $5 billion Pascua Lama project in Argentina, due for first production in mid-2013, will produce around 35Mozpa silver in its first five years.
 
Rio Tinto and Ivanhoe Mines’ Oyu Tolgoi project could produce up to 180Moz silver over its 59-year mine life when it enters production late next year.