Kitco News interviewed Andre Leyland of Thomson Reuters GFMS about the latest silver demand trends. While demand in 2014 was down very slightly from 2013, Leyland emphasized that 2013 was a record year for silver demand around the world. Looking forward, he expects demand to grow, and with it the price. In fact, Thomson Reuters GFMS is projecting the next couple of years to have significantly higher average silver prices than we’re seeing now.

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Highlights from the interview:

“The demand side held up pretty well. There was a 4% decline in demand, but it’s a lot better than you’ve seen in other commodities. Certainly a lot better than you’ve seen in the gold sector. Almost all of that was due to a decline in coin and bar demand from record levels in 2013…

“Jewelry demand increased by about 1.5% last year, and it would have actually been a lot higher than that, but we saw a big decline in Chinese demand for jewelry. Again, from record 2013 levels. Chinese demand was impacted by a lot of anti-gifting, anti-corruption policies by the Chinese government. Also, by a draw-down in stock levels that had been built up from the previous year…

“Since the beginning of this year, silver has been performing a little bit better. I think that’s partly because it overshot to the downside in 2014. Going forward, we would expect silver to perhaps outperform gold this year. That’s also what we’re seeing a lot of investors positioning themselves to do. If you look, for example, at silver ETF holdings, they’ve maintained their very high historical levels. They haven’t come down, whereas gold ETF holdings have. I think that’s because a lot of investors who want to position themselves for a potential precious metals rally know that silver will historically outperform…

“We think in the short-term there is room for weakness [in the silver price]. But overall, we view the average annual price as being at $16.50 for this year. But also for the price to strengthen towards the end of the year. So we’re expecting the price to end the year over $17 per ounce. Again, we think that 2015 will be the lowest average for the next couple of years…

“Certainly we’ve seen the photovoltaic sector, the solar sector, see an increase in demand this year. That had previously been hit by a number of factors. We’ve seen a slow-down in government subsidies post the financial crisis. We’ve seen substitution towards… solar panels that use less silver. You’ve also seen thrifting to use less solar per gram in each solar cell. What you’re seeing now is growth in the underlying solar sector returning to the market as economies strengthen worldwide. You’re seeing a move back towards thick-cell, silver heavy production. You’re also seeing a slowdown in the amount of thrifting that can be achieved in terms of using less silver per cell. So I think we can see some pretty steady growth going forward…”