Feb. 7 (Bloomberg) -- After the worst January for precious metals in two decades, investors still have a $102 billion bet on higher prices, hoarding more gold than all but four central banks and more silver than the U.S. can mine in almost 12 years.

The five analysts ranked by Bloomberg as the most accurate over two years expect silver to rise as much as 23 percent before the end of 2011 and gold 20 percent, the median of their estimates show. UBS AG predicts the strongest industrial demand for silver since at least 1990 and the second-highest sales of exchange-traded gold products on record.

The decade-long surge in gold attracted fund managers from John Paulson to George Soros and is now spurring central banks to add to their reserves for the first time in a generation. Once written off as demand for photographic film waned, silver found new uses in everything from solar panels to plasma screens, making it the precious metal most used in industry. As stocks rose 9 percent and Treasuries returned 67 percent since the end of 2000, gold surged fivefold and silver sixfold.

“I had to chuckle when I saw reports that it was over for gold,” said Michael Cuggino, who helps manage $10 billion at Permanent Portfolio Funds in San Francisco, and has about 20 percent of his assets in gold. “Some investors have taken money off the table after a significant run-up in 2010. If you look at the macro environment, the instability around the world, the worldwide currency devaluation, these factors all bode well.”

The Standard & Poor’s GSCI Precious Metals Index dropped 6.5 percent in January, the most for the month since 1991. Gold traded in London retreated 6.2 percent and silver 9.3 percent.

Monthly Slumps

Gold has had bigger monthly slumps four times in the last decade and plunged 34 percent from March to October 2008, before jumping 47 percent in the following four months. Silver posted larger monthly declines nine times over the same period and plummeted 57 percent over three months in 2008. It rallied 73 percent in the next four months.

Silver will climb as high as $36 an ounce this year, from $29.235 now, and gold will reach $1,620 an ounce, from $1,350, according to the Bloomberg survey of analysts.

Investors in exchange-traded products backed by gold own 2,028 metric tons, worth $88 billion, even after cutting their holdings by 4.1 percent since December, data compiled by Bloomberg show. ETPs trade on exchanges, with each share representing metal held in a vault. They accounted for 21 percent of investment demand last year, according to GFMS Ltd., a London-based research firm. Silver-backed ETPs fell 4.4 percent to 14,511 tons worth about $14 billion since December.

CFTC Data

While hedge funds cut their bets on higher gold prices by 42 percent since October, they still hold a so-called net-long, or bullish, position of more than 151,000 futures contracts, almost three times the average over the last 18 years, according to data from the Commodity Futures Trading Commission.

Central banks, the biggest owners, will add to reserves for a third consecutive year in 2011, the first time that’s happened since the 1970s, Deutsche Bank AG predicts.

The risk now is that an improving economic outlook will cut the allure of precious metals as a wealth protector. The MSCI World Index of equities has risen 4.2 percent since the start of January, the best start to a year since 1998. The International Monetary Fund on Jan. 25 increased its forecast for 2011 global economic growth to 4.4 percent, from 4.2 percent.

“Gold is going quiet,” said Pete Sorrentino, who helps manage $13.8 billion at Huntington Asset Advisors in Cincinnati, Ohio. “It’s good and healthy and characteristic of gold’s stair-step rally. We’ll see a little more downward pressure and then begin to trade sideways for an indeterminate time.”

SEC Reports

Gold accounts for 5 percent of the company’s $98 million commodity fund, compared with 15 percent in mid-December.

Another risk is the biggest investors, whose holdings are scheduled to be reported by the U.S. Securities and Exchange Commission on Feb. 14, according to Credit Suisse Group AG. Prices will likely drop and volatility increase should quarterly data show any of them cut their position, the bank said in a report Jan. 28. Investors last disclosed their stakes as of Sept. 30 in filings in November.

Paulson & Co. is the largest investor in the SPDR Gold Trust, the biggest ETP backed by gold, according to data compiled by Bloomberg. The 7.8 percent stake was worth $4.03 billion on Sept. 30 and would be valued at $4.15 billion now. Armel Leslie, a spokesman for Paulson, 55, declined to comment.

Soros Fund

Soros Fund Management LLC, which manages about $27 billion, also listed the SPDR Gold Trust as its biggest holding in a Nov. 15 filing. Soros described gold at the World Economic Forum’s January meeting in Davos, Switzerland, last year as “the ultimate asset bubble.” In a Nov. 15 speech in Toronto the 80- year-old said conditions for the metal to keep rising were “pretty ideal” and at this year’s Davos forum said the boom in commodities may last “a couple of years” longer.

Michael Vachon, a spokesman for Soros, declined to comment.

The precious metals most used in industry outpaced gold since the U.S. economy returned to growth in the third quarter of 2009. Palladium rose threefold, silver more than doubled and platinum jumped 57 percent, compared with gold’s 46 percent gain. Platinum and palladium are used in catalytic converters for cars and trucks. The London Metal Exchange index of industrial metals from aluminum to zinc jumped 86 percent.

Industrial demand for silver, excluding photography, will rise 18 percent to 478 million ounces this year, according to UBS, Switzerland’s biggest bank. Investors will buy 450 tons of gold through ETPs this year, the Zurich-based bank forecasts.

Mining Index

The 16-member Philadelphia Stock Exchange Gold and Silver Index, led by Freeport-McMoRan Copper & Gold Inc. and Barrick Gold Corp., fell 8.5 percent this year as metal prices dropped. All but one firm in the mining index is forecast to report an increase in annual earnings, according to the median of analyst estimates compiled by Bloomberg.

Higher silver prices hurt the profit of Rochester, New York-based Eastman Kodak Co. last year and are a “significant headwind” in 2011, Chairman Antonio M. Perez said on a conference call Jan. 26. Agfa-Gevaert NV, Europe’s biggest maker of healthcare imaging systems, said in a statement Nov. 15 that its Agfa HealthCare division was increasing prices for all imaging film products because of higher raw-material costs.

Bullion’s slide from a record is attracting buyers. “We struggle to recall a month when our total physical sales have been stronger,” led by Chinese gold demand, and turnover on the Shanghai Gold Exchange in January was a record, Edel Tully, an analyst at UBS, said in a report last week. “Elevated physical demand usually signals an impending bottom,” she said.

Silver Coins

Silver buying is also accelerating. One-ounce silver coin sales from the U.S. Mint jumped to a record last month. Ex Oriente Lux AG, based in Reutlingen, Germany, will start adding the metal to its U.S. ATMs that sell gold in banks, shopping centers and jewelry stores this month.

Investor demand for precious metals accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and as governments and central banks led by the Federal Reserve pumped more than $2 trillion into the world financial system. That stoked concern that inflation will accelerate. The Fed cut interest rates to near zero in December 2008 and have kept them there since and Greece and Ireland got bailouts.

“At the moment, people still have fear about inflation, about the debt crisis, and I don’t see any resolution to the debt crisis when the Fed is buying debt again and again,” said Thorsten Proettel, an analyst at Landesbank Baden-Wurttemberg in Stuttgart. “Most people will be loyal to their investment because the fear doesn’t evaporate.”