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Investor interest in silver will continue to play the deciding factor for silver prices over the following months. The silver prices will go back to $30/oz and remain consistent throughout the year if HSBC’s Outlook report is anything to go by.

This report was generated considering factors like over ground excess stock of silver due to an unequal scale struggle between moderately increased mine production and scrap silver supply and mediocre demand in industrial and physical demand.

If prices are to be stopped from falling further, then the excess stock will have to be absorbed through net divestment. HSBC report believes that the prices will stay moderately bullish over a continuous period of time, hovering around $32/oz.

The bank feels that while industrial demand can impact prices, investor sentiments will be the determining factor to spike silver prices in the short term. Investor demand in silver ETFs has absorbed a sizable amount of surplus silver generated by slack from the decline in demand from photography and jewellery.

According to a rough calculation, silver ETFs will hold the value of nearly two-thirds of annual silver mine output this year and twice the demand for jewellery and silverware.

There are various other factors affecting investor demand for silver.

• Easing of monetary policy by the US Federal Reserve and other central banks, further this year.
• Possible negation in real estate rates due to steadily accumulating debt levels.
• A shift in focus from the Euro crisis to upcoming US elections. If the euro crisis is dealt with, resulting in the strengthening of the EUR, this will support silver prices as gold has an inverse relationship with the USD.

Silver has always been thought of as a traditional safe-haven asset, but it has not behaved like one during the sovereign risk crisis in the eurozone. Partly it was because it had competition from other safe-haven assets, and most importantly, unlike other assets that are dependent on each other’s behaviour, silver traded independently from USD and US Treasuries and German and British government bonds.

Although silver is influenced by shifts, it is greatly manipulated by supply and demands. As it is more independent than other assets, investors will find it attractive for portfolio diversification or to maintain a risk-neutral portfolio. Investing in silver may be a good chance for those who expect some diversity from gold.