Physical Silver Demand Surges to All-Time High, Scrap Supply Tumbles

NEW YORK (TheStreet) -- Demand for physical silver last year rose to an all-time high as the value of the white precious metal sank into a bear market following a near-decade-long rise.

Physical silver demand rose to 1.08 billion ounces, up from 954.4 million in 2012, as cheaper prices from a 35% drop in 2013 attracted buyers, according to an annual survey by The Silver Institute.

"The coins were just flying off the shelves; again, [it was] a lot of bargain hunting as the price came down," Andrew Leyland, manager of precious metals demand at GFMS Thomson Reuters, said in a phone interview from London.

Silver, which often tracks the price of gold, suffered from the yellow metal's worst year in three decades and took a hit from continued moves by companies -- especially those in the tech sector -- to reduce industrial silver use.

Scrap supply tumbled 24%, its lowest level since 2001, which Leyland said largely is due to companies moving away from silver in industrial markets.

"Silver almost sort of double whammied last year," he said.

Despite the uptick in physical demand and improved price action this year, silver likely has a rocky path moving forward.

"Everything seems like its pointing towards increased volatility," Andrew Chanin, co-founder of PureFunds, said in a phone interview from New York.

>> Watch: How Russia Disrupting Nat Gas Through Ukraine Can Hurt Gold

>> Also see: Nobody Is Bothering to Buy Gold and UBS Says That Is Its Biggest Positive

-- Written by Joe Deaux in New York.

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