"The chief exception to this was India in 2008," says the report, noting that Indian consumption of Silver Bullion bars exceeded 3,100 tonnes, "although this gave way to widespread disinvestment the following year."
A lot of investment has taken the form of American Eagle Silver Bullion coins – which are produced specifically for investors – according to the report.
The US Mint website states that it has sold over 37 million one ounce American Eagle Silver Bullion coins so far this year – up from 34.66 million over the course of 2010.
"The US Mint's impressive outturn has presented the Mint with a series of challenges," the Silver Institute report notes.
"The rationing, that at times has therefore been imposed by the US Mint (with respect to the number of coins that can be delivered to authorized dealers), has presented an opportunity to the manufacturers of other bullion coins to gain market share in the United States."
Not all of these coins are bought by US investors.
"We estimate that European Eagle demand may have amounted to roughly 20%-30% of total US Eagles produced," the report says.
The report's authors believe the surge in European Silver Bullion demand represents something of a break with tradition.
"Historically, precious metals investment in Europe has centered on gold, with silver having significantly lower prominence. This is partly due to VAT being applied to silver bars and coins, but not since 2000 to Gold Bullion products. It also, however, stems from silver's legacy as a monetary asset being weaker than, say, in the United States."
The financial crisis, they believe, has proven something of a catalyst for European silver investment.
"Sales of Silver Bullion to investors have been especially strong in the three years since the collapse of Lehman Brothers in September 2008, which provided a tremendous stimulus to investment in physical precious metals products that are free of any counterparty risk.
Besides the safe haven appeal of silver, for many investors in the white metal it is seen as a more highly leveraged alternative to gold, with greater upside potential."
The dominance of physical silver investment by two western countries is in sharp contrast to the gold market – where India and China are the world's two biggest buyers.
"With regards to the Chinese market the level of demand is at present relatively modest, given that the bar market is barely two years old," the reports says.
"As a result it is difficult to gauge the 'true' level of demand, and whether, for example, it will eventually resemble the US or German markets, in terms of their retail investment levels."
source: BullionVault
