Azernews.Az

By Bloomberg

Silver prices on average will decline 14 percent this year as speculation that the Federal Reserve will raise U.S. interest rates spurs a shift to alternative assets, Thomson Reuters GFMS said.

Silver will drop to $16.50 an ounce from the average fixing price of $19.08 in 2014, Andrew Leyland, manager of precious- metal demand at Thomson Reuters GFMS, said Tuesday in a telephone interview. He spoke a day before the release of the company’s “World Silver Survey 2015” on behalf of the Washington-based Silver Institute.

Silver futures declined 2.7 percent last month after the Fed damped speculation that it will delay boosting borrowing costs. Higher rates drive investors to favor assets that pay interest, such as bonds, curbing the metal’s appeal as a store of value, since it generally offers returns only through price gains.

In 2014, physical demand declined 4.1 percent to 1.07 billion ounces from a year earlier as purchases of coins and bars fell from a record, according to the report.

Industrial fabrication, which includes silver used in electronics, photography and brazing alloys and solders, dropped 0.5 percent to 594.9 million ounces last year.

In 2014, most “primary” producers refrained from hedging, while several companies locked in the price of silver that was mined with base metals, Leyland said.

“For the base-metal producers, this is a very small part of their revenue stream, and it helps to lock in the price,” he said. “It gives them a bit more certainty.”

On Tuesday, silver futures for July delivery rose 0.8 percent to $16.579 on the Comex in New York. The price has averaged $16.60 this year.