The global silver market is set for a 1,678 mt physical deficit in 2016, down from a 3,987 mt deficit in 2015, GFMS Thomson Reuters said in its latest market review Thursday.
It will be the lowest physical deficit since the silver market moved to an overall shortfall in 2012.
The reduced deficit is due to a 9% drop in overall physical demand to 34,228 mt in 2016, the lowest total for four years, while supply is set to fall 3.2% on the year to 32,549 mt.
Forecast jewelry and silverware demand is down 11% to 8,282 mt, while coin and bar demand is set to fall 24% on the year to 7,137 mt, both also four-year lows.
"A decline in discretionary spending, thrifting, lower economic growth and a higher silver price have all contributed to the overall decline [in jewelry demand]," the report said.
And the drop in coin demand is "unsurprising given the strong increase recorded in the prior year, when investors entered the market en masse to bargain hunt following the silver price decline during the second half of last year."
Industrial fabrication is set to fall only marginally, down 0.6% on the year to 18,811 mt, but will represent the lowest total since 2009.
Meanwhile, ETF build is set to reach 2,296 mt, the largest since 2010 and up from a drawdown of 569 mt in 2015. Exchange inventory build is forecast to climb fourfold on the year to 1,990 mt, its highest since 2012.
Due to the ETF and exchange inventory build the net balance of the silver market will show a 5,964 deficit for 2016, up from a 3,823 net deficit in 2015 and the steepest since 2008.
Silver was priced around $17.05/oz Thursday morning, up around 20 cents/oz on the day.
