By Melissa Pistilli—Exclusive to Silver Investing News

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After closing above $18 an ounce for the first time in a week Wednesday, the price of silver bounced another .50 cents Thursday as stocks and commodities gained while the dollar weakened.

Early in the trading day, analysts pegged resistance at $18.50 an ounce with support at $18.20 an ounce. Silver moved up to a high of $18.59 mid-morning in New York and closed at $18.54 an ounce.

Silver has benefitted from its industrial side the past few days as global economic sentiment improved, which accounts for silver outperforming gold yet again. The OECD reported Thursday that the global industrial economy is rising from the ashes at a faster than anticipated rate, although sovereign debt issues and overheating in developing economies are still dark clouds hovering overhead.

While investment demand will continue to be a driving factor in a healthy silver market, increasing industrial demand is also playing a strong role, according to the Silver Institute’s World Silver Survey 2010, produced annually by research firm GFMS Ltd.

2009 Silver Prices and Investor Demand

According to GFMS Executive Chairman Philip Klapwijk, silver investment currently comprises a quarter of silver demand, a level not seen since the 1970’s, and investments now account for a greater percentage of silver demand than jewelry usage.

Over the past few years silver, like gold, has caught the attention of safe-haven seeking investors. “ETFs and retail investment were key vehicles for silver investment in the first quarter of the year, the rally in the latter part of 2009 being more focused on the Comex,” noted the GFMS report.

GFMS says this increased demand in silver investments is the fuel that launched silver prices higher in 2009 in the face of a rather large market surplus of 283.7 million ounces of silver.

2009 Silver Prices and Industrial Demand

Silver prices in 2009 picked up over 50 percent through the year and averaged $14.67 an ounce, reports GFMS, the white metal’s second highest yearly average since peaking in 1980. As for 2010, Silver has gained another 6 percent.

Despite the importance of increased investment demand to rising prices, industrial demand continues to have a marked impact on silver prices. As Klapwijk points out, silver has tracked copper prices many times over the past year, a strong indication of the influence trends in the industrial sector have on the some time precious metal.

And as economies around the world recover and grow in 2010, demand for industrial use silver will, too. In 2009, silver industrial fabrication fell nearly 21 percent as markets everywhere took a beating. “Silver’s demand is a function of the economy, not of the price,” remarked Klapwijk. “Industrial demand has come back quite strongly this year from a low level.” GFMS expects industrial silver demand to recover strongly this year, “reflecting stock replenishment and higher GDP growth.”

This expected growth in industrial demand for silver may lead the white metal to outperform gold in 2010, said Klapwijk, who sees silver reaching $20 an ounce “in the next couple of months.”

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