Director Philip Newman presented the Metals Focus-Silver Institute Interim Silver Market Review late this week, saying demand for the metal was bolstered by record high industrial fabrication.
However, the slowing global economic growth amid an ongoing US-China trade dispute had weakened demand for silver from some industries, especially crippling several areas of electrical and electronic end-uses, which were trends "broadly in line with a global economic downturn", said Newman in New York.
"However, their negative impact on silver demand, has been mitigated by higher silver loadings, especially in the all-important automotive sector as vehicles become more sophisticated. Silver consumption in the photovoltaics sector has also grown as more countries push ahead with renewable energy projects in 2019."
Increased purchases by investors and strong demand for silverware and silver jewellery in India added demand.
Global silver jewellery and silverware demand is projected to grow by 3% and 4%, respectively, in 2019. Newman ascribed the positive outlook for both almost entirely to India, where gains had been assisted by increasing awareness of sterling silver, growth in organised retailing, along with the benefits from restrained silver prices in the first half of 2019.
By contrast, US jewellery consumption, the world's second largest single-country market, remained relatively soft thanks to factors such as competition from gold and company-specific retailing problems.
Newman also expected to see healthy gains for physical investment, with sales of silver bars and coins projected to rise by 7% to a three-year high.
In the US, investment was on track to record its first annual increase in four years, thanks to improving price expectations and rising price volatility, although levels remained historically low. In India, the partial recovery that started in 2017 continued this year, even though the sharp rally in the rupee price has seen sales ease recently, particularly in rural areas.
Overall, the silver market is expected to record a small surplus of about 16.5Moz in 2019.
"That said, this metal should be easily absorbed by investors as rising macroeconomic uncertainties and fresh monetary easing by major central banks rejuvenated the appeal of safe haven assets from mid-2019 onwards which, looking ahead, should continue to benefit precious metal prices," Newman said.
Even allowing for the recent, modest pull-back in the silver price, the past few months had seen a major improvement in investor sentiment towards silver. As a result, silver rallied to a three-year high of US$19.65 in early September, which was accompanied by a decline in the gold-silver ratio to a one-year low.
For the full year, Metals Focus expects the silver price to average $16.20, up by 3% year-on-year.
Newman said silver production remained "finely balanced" and was expected to fall by 0.7% in 2019 to 849.3Moz.