Further Upside In Sight For Precious Metals

Source:

Most of the key drivers behind the bull market for gold (and for the other precious metals) remain in place. This suggests that the downside is limited and any correction may offer a buying opportunity. Certainly recent trading behaviour in the gold market reinforces this point.

Most of the key drivers behind the bull market for gold (and for the other precious metals) remain in place. This suggests that the downside is limited and any correction may offer a buying opportunity. Certainly recent trading behaviour in the gold market reinforces this point. Despite the weakness in demand from the jewellery sector, we note buying from this source on any price moves towards $600 per ounce. With strong GDP growth in East Asia and India, we continue to expect some support from the jewellery sector on any dip in prices.

We also expect the supply side to provide some support. We do not expect to see any great surge in gold scrap supply unless prices exceed $700 per oz. The growing acceptance of a higher gold price appears to have constrained the increase to secondary supply. Any gains from mine output should also be more than matched by the likely fall in official sector sales, as CBGA disposals should stay well under quota and small scale purchases elsewhere could continue.

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