With physical gold outperforming "virtually every other asset class on a relative basis," BMO Capital Markets Global Commodity Strategist Bart Melek advises the trend will "likely stretch well into 2009." However, the relatively strong U.S. dollar and the prospect of global disinflation have “made BMO Research somewhat less optimistic about the prospects of the metal in the first half of 2009."
"A modest turnaround in valuations should begin once markets start seeing better economic times ahead. The change in market outlook should yield better metals and gold prices, as well," he said. Investors should look for signs of an economic bottom, slowing inventory growth and rising long-bond yields (an end to aggregate price declines) as signals for better times to come for metals, gold, bulks and material-based equities."
"Investors' eventual emergence out of the current panic mode (which is driving capital into treasuries and the U.S. dollar). . .should help propel gold to an expected $900/oz by the end of 2010."