In a presentation Wednesday to the Silver Institute in New York City, GFMS forecast an average silver price of $19.94 this year, a gain of 36% year-on-year.

Despite what currently appears to be a substantial year-end correction in the price, GFMS Chairman Philip Klapwijk said he expects the silver price to trade over $30 per ounce in 2011, "with the annual average likely to easily surpass the current all-time high of $20.98/oz."

"However, we are doubtful such elevated levels will be sustained throughout the year, as a result, we seen an annual average either side of $28 as more likely," GFMS said. "We could also add that a retreat from the over $30 would not necessarily imply an end to the multi-year rally in 2011."

Meanwhile, GFMS projects that fabrication demand will rise by 10% this year, "as a strong but only partial recovery in industrial uses, record coin demand and slight growth in jewellery offtake counter losses in photography and silverware fabrication."

"Ongoing but more modest growth in 2011, however, should lift global demand back to earlier record levels," GFMS advised.

Industrial demand is expected to rebound by 18% or by more than 65 million ounces this year, "thanks to a recovery in underlying demand and the refilling of a heavily denuded supply pipeline," GFMS predicted. "Limited further gains from stock replenishment plus a possible slowdown in global GDP growth should mean less dramatic increases for industrial offtake next year, perhaps ruling out a return to pre-crisis levels despite the surging contribution from the photovoltaic and ethylene oxide catalyst sectors."

While silverware is expected to fall 13% this year, jewellery fabrication is expected to increase 3%. More modest gains are forecast in 2011.

GFMS anticipates that coin minting will rise 23% this year, taking the total to an all-time high.

Investment demand (including all coins and medals) is being projected to grow this year to an all-time high of more than 210 million ounces (6,500 tonnes) with its net value reaching $4 billion.

"Further gains to a new record are also projected for 2011," GFMS predicted. "Conditions in 2011 [are] likely to remain conducive to high levels of investment, providing the chief support to further price gains."

Meanwhile, GFMS forecasts fundamental demand (excluding investment) should continue to rise next year, chiefly to gains in industrial uses. "However, this will be outweighed by gains in total supply as mine output rises (both scrap and government sales are projected to fall)," GFMS advised.

World silver mine production is expected to rise by 3% or 24 million ounces (740 tonnes) this year, "lifted by strong output from gold by-product mines," Klapwijk said in his presentation to the Silver Institute.

Production gains center on Mexico-mainly due to the ramp up at Goldcorp's Penasquito and Coeur d'Alene Mines' Palmarejo mines; Argentina because of the ramp up of Silver Standard's Pirquitas mine; Chile and Australia.

Primary silver mine production is expected to increase around 3% "with stronger gains for gold and lead/zinc, while copper mines look set to deliver slightly less silver," GFMS forecast.