Strong appetite for silver boosts coin production
Chris Flood

Mints around the world almost doubled their silver coin production in the first quarter in response to a surge of investor interest in the metal.

It follows an extraordinary buying spree for coins and bars by investors last year that was accompanied by a record surge of inflows into silver exchange-traded funds.

It suggests that silver has benefited as much as gold from the trend by risk-averse investors to seek out havens following the September collapse of Lehman Brothers, according to GFMS, the consultancy, which on Wednesday released its Silver Survey 2009 in conjunction with the Silver Institute, the industry association.

Sales of silver coins and medals jumped 63 per cent to a record 2,019 tonnes in 2008 while demand for gold coins and bars reached 837 tonnes, up 93.3 per cent on 2007.

There was a big increase in silver coin minting even before the Lehman collapse, but this turned into an "explosion" of interest in the US and Europe in the last four months of 2008.

Demand for silver has continued to rise in 2009 with the US Mint seeing a near-70 per cent increase in coin sales in the first quarter compared with the same period last year.

GFMS said that there was "little sign" that last year's shortages were any less acute this year.

Rapid growth in the popularity of exchange-traded funds among investors has played an important role in both the silver and gold markets.

Last year, investor inflows into the three main silver exchange-traded funds rose 54 per cent to 8,250 tonnes. Gold exchange-traded funds saw inflows of 321 tonnes, up 36 per cent, to 1,222 tonnes.

However, GFMS said silver's growing popularity as an investment asset was handicapped by weakness in other sectors. It warned that industrial consumption had slumped in the first few months of this year and that general weakness in all forms of fabrication, including jewellery demand, was likely to act as a drag on prices in 2009.

Silver hit a 28-year high of $21.24 a troy ounce in March 2008. On Wednesday, it was $14.08, up 24.6 per cent this year.

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