Mixed Medium Term Prospects for Gold, Silver, and Platinum

Source:

Given the current financial market turmoil precious metals should benefit from continued safe haven buying. A further issue, which looms on the horizon and has the potential to lift investor activity, is the threat of military intervention in the Middle East associated with Iran's nuclear ambitions.

Given the current financial market turmoil precious metals should benefit from continued safe haven buying. A further issue, which looms on the horizon and has the potential to lift investor activity, is the threat of military intervention in the Middle East associated with Iran's nuclear ambitions. Support has also been encouraged by several factors, namely lower US interest rates, record dollar lows, surging oil and mounting concerns over increased geo-political risks. As such, the appeal of the precious metals as a safe haven, and as a dollar and inflation hedge, has continued to draw inflows from the investor community.

Gold - positive fundamentals remain in place

On the basis of the recent turmoil in world stock markets, with many commentators now citing equities to have entered bear market territory, gold investment demand should remain strong...

Concerns were then compounded by the bail out of the GSEs (government sponsored enterprises) Fannie Mae and Freddie Mac. The US government was prompted to step in after Freddie and Fannie's shares plummeted due to substantial sub-prime related losses, and raised fears over these two institutions (which have backed the vast majority of new mortgages in the United States) possibly failing. Given the above conditions, it seems likely that this phase of financial market turmoil will continue over the near term. Gold should be buoyed by this and continued safe haven buying...

On the basis of the above, prices should average a little under $970 over the remainder of the year, producing an average for the full year of $940. However, sentiment is likely to wane in 2009 and drive prices lower due to rising short-term US interest rates, the start of a recovery phase in the dollar and an easing of inflationary expectations. As such, investment demand is expected to recede, and lead to an average price for next year of $850.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe