At a time when hedge funds are reducing bullish silver bets by the most in two years, analysts predict a rally as manufacturing expands from China to the U.S., boosting demand for the precious metal most used in industry.

Money managers cut wagers by 68 percent in two months as futures tumbled 22 percent, Commodity Futures Trading Commission data show. Prices will rally to average $35.40 an ounce in the fourth quarter, the third-highest on record, according to the median of 11 analyst estimates compiled by Bloomberg. Shares of Fresnillo Plc, the largest producer, will rise 25 percent in the next 12 months, based on the average of seven forecasts.

“A greater amount of confidence in the global economy generally means higher growth and that means more silver demand,” said David Jollie, an analyst at Mitsui & Co. Precious Metals Inc. in London and the most accurate forecaster in last year’s London Bullion Market Association survey of silver prices. “If you look out beyond the end of the year, you can still see reasons to be bullish.”

Electronics Industry

The commodity rose 3.4 percent to $28.855 this year on the Comex in New York, compared with a 1.3 percent gain for gold. The Standard & Poor’s GSCI Spot Index of 24 commodities gained 0.2 percent since the start of January and the MSCI (MXWD) All-Country World Index of equities gained 5.5 percent. Treasuries returned 0.6 percent, a Bank of America Corp. index shows.