Record levels of silver investment demand, focused mostly on the physical metal, coins and bars, drove average prices for the metal to record highs last year, although a repeat performance is not likely in 2012.
According to the World Silver Survey 2012, the average price for the metal that is best known for its use in jewellery and coins was $35.12 per ounce last year.
"If you look at the silver investment last year it obviously took several forms, particularly in the price move that began in Aug. 2010 and ended in April 2011," said Philip Klapwijk, of the London-based Thomson Reuters GFMS, the metals research company that researched and compiled the 18th annual World Silver Survey.
"I don't think that we're going to see an investor move on such a scale this year that is going to see prices reach the levels they did in 2011," he added in an interview. " I think we are more comfortable with an upside this year in the low $40s rather than any higher than that."
The silver market tends to shadow the much larger market for gold, which climbed to new heights in recent years as a safe haven for investment in the global economic crisis of 2008/09.
In late April last year, silver prices briefly touched $48.70/ounce, driven higher as financial institutions bought silver to honour out of the money call options and retail investors joined the charge on expectations prices could go still higher.
Mr. Klapwijk said silver prices would likely continue to shadow the gold price and could conceivably move higher again in 2013 if the gold price crosses $2,000/ounce, a level it flirted with but failed to reach over the past year.
The report released by the Silver Institute, an association of miners, refiners, fabricators and manufacturers, showed that physical silver bar investment grew by 67 per cent in 2011, while global coins and medals fabrication rose by nearly 19 per cent to an all-time high.
It said physical silver demand was driven in part by inflation concerns in countries like India and China.
The survey showed that total fabrication demand fell 1.5 per cent, but still reached the second-highest level since 2000. Silver use in industrial applications fell by 2.7 per cent in 2011 after end-users slashed orders late in the year amid fears over the fallout from the euro zone's sovereign debt crisis.
At the same time, holdings of silver Exchange Traded Funds (ETFs) slipped 4 per cent in the year, suggesting a shift in sentiment among investors who preferred to hold the physical commodity rather than paper claims on silver.
"I think that in a sense points to a degree of skepticism about counterparty risk," said Mr. Klapwijk.