Silver at risk as China slows

Despite a 13% surge at the beginning of 2012, silver stocks have stagnated recently as China’s factory output, retail sales and investment data have all slowed, along with a further drop in the country’s inflation rate to a twenty month low.

Silver prices had shot up 20% in the first ten weeks of 2012, driven by investment demand, and had been outperforming platinum, palladium and gold, according to a recent release issued by The Silver Institute.

Investors are increasingly acquiring silver in various forms, and silver-based ETFs account for 586 million ounces of silver, up from 576 million ounces in 2011.

China plays a significant role in silver’s demand outlook, however, as its net imports of silver nearly quadrupled to more than 3,500 metric tons in 2010, boosted by sharp increases in demand by the industrial sector and the jewelry industry.

Industrial demand is forecast to grow by 36% from 2010 through 2015.

With Chinese officials now cutting the country’s 2012 target growth rate to a low of 7.5%, investors are increasingly concerned about the future forecast for silver.