BMO Forecasts Weak Near-Term Metals Prices with Recovery in H2/09

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BMO advised that gold should benefit from an improving economic environment. "To the extent that gold reacts ahead of actual inflation, it is quite possible that the gold price may start firming up in the second half of 2009."

In a recently published analysis, BMO Capital Markets predicted that gold will lift to $900/oz by the end of 2010.

Meanwhile, BMO's analysts expect base metals and bulk commodities to remain under considerable selling pressure in 2009, substantially downgrading short- and medium-term commodity price forecasts...

However, the analysts suggest that commodity markets may be re-energized after the G7 economies emerge from their slump in the latter part of 2009.

"Sharp decline in consumer prices around the world, owing sharply to lower energy prices, poor state of the credit market and below-potential economic growth, may also keep gold from breaking out meaningfully above the $750/oz range in the first half of 2009," the analysts said.

BMO advised that gold should benefit from an improving economic environment. "To the extent that gold reacts ahead of actual inflation, it is quite possible that the gold price may start firming up in the second half of 2009."

"Prices are likely to move toward $875/oz in the latter part of the year, but only after it becomes apparent that the global economy has turned and once the financial sector's abilit6y to generate credit returns. At that time a weakening dollar should also assist gold higher," the analysts said.

Long term, the analysts advised that gold "is likely to be increasingly used as a protection against financial market and geopolitical instability-portfolio-drive reasons BMO likes gold. The growing use of jewellery and bullion as stories of wealth in the developing and the industrial world, rising costs and primary supply side constraints should also serve as support."

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