Unprecedented coin buying and strong silver jewelry purchases, fueled by a 24 percent drop in prices, sent physical silver demand to a record high in 2013, a top analyst at metals consultant Thomson Reuters GFMS said on Tuesday.

    Resilient demand so far this year should keep 2014 silver prices from falling sharply year-over-year, said Andrew Leyland, manager of precious metal demand at Thomson Reuters GFMS.

    In April 2013, a dramatic two-day $5 slide and a similar $225 drop in gold unleashed years of pent-up physical demand for coins and bars among retail investors who had been waiting for a bargain entry price point, particularly in the lower-priced silver.

    Even as institutional investors exited their positions in gold exchange-traded funds last year, silver ETF holdings have still held relatively steady.

    “Silver has been holding up a lot better than gold. There’s been a view in the market that sub-$20 silver is actually quite good value as a lot of retail investors have this psychologically important $20 level in mind,” Leyland told Reuters ahead of the release of World Silver Survey on behalf of industry group Silver Institute.

    For 2013, total silver physical demand rose 13 percent to an all-time high of 1,081.1 million ounces.

    Price-sensitive silver jewelry and silverware demand both rose more than 10 percent last year, supported by an increase in silver imports by India, Leyland said.

    India, traditionally the world’s largest bullion consumer, has hiked its gold import taxes and unveiled a flurry of regulations earlier this year in an attempt to reduce its current account deficit and to lift the rupee from record lows.

    Silver’s industrial demand, which is largely insensitive to prices and represents about half of its annual global demand, remained largely flat in 2013.

    OUTLOOK

    Looking forward, Leyland said he expects silver jewelry demand to have risen in the first three months of 2014.

    In terms of silver investment coin buying, he said that demand fell slightly due to higher sales tax in European countries such as Germany and Estonia so far this year.

    U.S. Mint data showed silver coin sales have outperformed that of gold in the first four months of the year.

    GFMS’ Leyland said he still expects full-year silver prices to average $19 in 2014, lower than the $23.79 in 2013.

    Expected U.S. dollar strengthening this year and improving equities market prices should pressure assets such as gold and silver which are often seen as safe havens, he said.

    “It’s more likely a change in investor sentiment will impact silver on the downside rather than fundamentals, which is looking pretty strong,” Leyland said.

 (Reporting by Frank Tang; Editing by Cynthia Osterman)