Silver prices were expected to exceed USD 50 an ounce by the end of 2012, Thomas Reuters GFMS reported. Silver prices far this year have averaged 35.70, a rise of 88 percent year-on-year. In Mongolia, record breaking prices for precious metals have caused miners to reevaluate their production to allow for more gold and silver.

“We now forecast a full-year average price of USD 35.66 in 2011, and expect further price strength in 2012. The main driver of the price remains investment demand, which has absorbed the substantial market surplus that has characterized the silver market in 2011,” GFMS said.

“The resultant silver market surplus is expected to once again be absorbed by investors... However, downside risks remain, including the potential for the sovereign debt crisis to precipitate a liquidity crunch, impacting the real economy.”

Nevertheless, GFMS said that it expected to see silver's bull run to continue, with the average price expected to be in excess of USD 45 in 2012. World investment in silver may reach 278 million ounces in 2011, its second-highest volume in the GFMS data series.

Although this represented a slight fall in ounces from 2010, it would set a new record high in value terms. Fabrication demand may also increase by some 4 percent in 2011, with industrial offtake set to rise in spite of the Japanese earthquake, weak economic growth in western economies, and the end of stock replenishment. Jewelry demand will like edge higher despite strong silver prices, while silverware and photography would weaken further. Demand for coins and medals; however, is set to establish a new record high.

The report expects mine production to grow by 4 percent for the ninth consecutive year. Globally, output from primary silver mines was expected to increase marginally year-on-year.