Upside in Gold and Silver, PGMS To Underperform由BC

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"RBC recommended that investors. . .Consider holding a significant position in the gold ETF or bullion, in lieu of cash."

RBC Capital says it expects significant upside in gold in 2009 and it expects both gold and silver to perform well in early 2010 as "inflation expectations increase with prospects of global economic recovery."

The investment bank said, in its Global Mining 2009 Investment Strategy and Outlook report, it expected gold to perform well this year, particularly in the first quarter. The bank said that gold had clearly outperformed in the majority of previous Fed rate-cutting cycles that were accompanied by accelerated levels of money supply and negative real rates.

However, in an extended global recession the bank expected a number of emerging market economies to come under significant pressure and this could lead to significant de-stocking or scrap sales of gold occurring in the second half of 2009.

The bank added that even if it saw gold prices weaken significantly in the second half of 2009, it believed gold and silver would still perform well in early 2010.

RBC said it expected silver to perform in line with gold, although silver was more economically sensitive due to its extensive industrial uses. A risk for silver would be the restart of base metal mines later in 2010, which would bring new mine supply of by-product silver to market.

It advised investors to avoid stocks with market capital smaller than $500m or stocks with debt to total capital of larger than 40%, significant bullet debt payments or convertible debentures.

RBC said the PGM pricing basket is expected to underperform throughout 2009 or until the economy and automotive sector make a sustainable recovery in late 2009 or early 2010. The bank expects a similar performance from diamonds, "which are more leveraged to discretionary spending at the peak and back end of an economic recovery."

RBC recommended that investors start the year with an "overweight" position in both gold and silver equities and commodities. "Consider holding a significant position in the gold ETF or bullion, in lieu of cash," it said.

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