Thomson Reuters GFMS’s Philip Klapwijk Wednesday forecast an average silver price of $35.66 per ounce this year, a short-term forecast of $35-$40 through year-end, as well as a price above $50/oz by the end of 2012.

In a speech before the Silver Institute in New York City Wednesday night, Klapwijk said conditions next year are likely to remain supportive of additional growth in silver investment, underpinning silver price gains.

However, as mine production of silver continues to grow, it could be a negative development for the silver price outlook.

Klapwijk forecast a “large and growing fundamental market surplus” of silver of +/-230 million ounces this year.

Although silver’s core fabrication demand (excluding coins) should rise next year, largely due to gains in industrial consumption, “it will nonetheless be exceeded by gains in production and recycling.” However the substantial silver market surplus should be absorbed by silver investors, Thomson Reuters GFMS suggested.

“Investor interest remains strong due to a favorable financial backdrop and in spite of two major sell-offs,” Klapwijk observed. Meanwhile, he added, underlying secular growth in industrial demand continues, with much of this relatively price-insensitive, particularly in the short-run.

Thomson Reuters GFMS also sees little threat to silver prices from higher government silver sales or even gains in silver scrap supply.

Silver coin minting may rise by 25% this year, taking the total to an all-time high in Thomson Reuters GFMS data series.

Jewelry fabrication is expected to increase slightly this year, partly due to substitution-led gains at the expense of gold. Thomson Reuters GFMS anticipates further declines in jewelry fabrication silver demand next year.