For the bull run (up 11% YTD) to continue, says the Citi team, significant investor interest in the form of ETF and physical bar holdings will be needed to offset muted industrial demand and "largely price-inelastic mine supply expansion." Strong demand in 2013 - including record sales of U.S. Silver Eagle coins - was bargain hunting amid diving prices, says the team. "We very much doubt that bullish market sentiment is sustainable due to weakening fundamentals and forecast prices to average $20.40/oz. this year."
As for industrial use, keep an eye on demand from China's solar industry. Net Chinese silver imports fell 37% Y/Y, at least in part due to solar consolidation there and significant volumes of excess capacity being closed. Citi is forecasting additional declines this year along with rising exports, meaning investors will need to absorb an even higher volume of the metal.