Gold ETF Holdings Remain Robust - Silver Could Outshine Gold

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"Looking forward we think the need for safe-haven investments will grow while at the same time the level of distressed selling may ease, which is likely to see gold prices trend high again. If fresh weakness is seen, then expect dips to attract even more buying," ScotiaMocatta asserted.

In spite of poor demand outlook in the short term, ScotiaMocatta insists the long-term outlook for precious metals remains bullish.

Although gold prices remain under pressure as investment funds cut their risk exposure, ScotiaMocatta's recent Metal Matters analysis suggests "others are looking to diversify into gold as a means of protecting their wealth." "Looking forward we think the need for safe-haven investments will grow while at the same time the level of distressed selling may ease, which is likely to see gold prices trend high again. If fresh weakness is seen, then expect dips to attract even more buying," ScotiaMocatta asserted.

The current demand for physical gold has left numerous mints unable to fabricate enough gold coins and bars fast enough. "The question is whether this surge in broad based interest is the retail market buying at the end of the bull market, or are they the ones with cash who want to protect their wealth and are therefore a harbinger of where gold is heading? Generally we favour the latter view as we feel the legacy of the U.S. government's bailouts will undermine the value of the dollar and confidence in the financial system."

ScotiaMocatta also noted that gold ETF holdings remain robust. "In addition to strong retail interest, long term investors are also keeping their holdings of gold in the ETFs high." At the end of last month, 1,020 tonnes of gold was being held, down only 24 tonnes from the peak seen in mid-October.

"Considering the flood of liquidation in other assets classes in October, long-term gold investors have given gold a vote of confidence," the bullion company said...

ScotiaMocatta advised that "silver is well placed to outshine gold." Admitting that silver is an industrial metal and has a tendency to be more volatile than gold, ScotiaMocatta asserted, "This works both ways and if gold starts to recover, then silver could outperform gold on the upside."

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