Gold, Silver and PGMs to Do 'Very Well' Next Few Years-BMO


". . .silver, platinum and palladium will outperform gold"

After a very strong 2009, BMO Capital Markets Global Commodity Strategist Bark Melek forecasts gold and other precious metals are "projected to do very well over the next several years."

Melek suggested that silver, platinum and palladium will outperform gold "as they benefit from quasi-money status and their high usage in industrial applications as manufacturing recovers.

In his analysis published Wednesday, Melek anticipated "more upside than downside risks" after the substantial correction in commodity markets last month.

Gold Is Excellent Hedge

"Gold will likely be kept firm into 2010 and 2011 by a relatively weak greenback, record-setting U.S. fiscal deficits, rising inflation concerns and higher jewelry demand, which has been hit hard by the recession," Melek advised.

BMO believes "gold is an excellent hedge and will remain stable," and remains "quite comfortable with the $1,150/oz price forecast over the next two years."

Silver, PGMs Outperform Gold

Meanwhile, Melek said demand rebound and sluggish supply are prompting PGMs and silver to outperform.

Melek noted silver supplies were flat last year, platinum availability fell more than 10% and palladium supply declined 4%.

"With demand for industrial silver rebounding sharply in 2010, likely around 19%, as global industrial activity and auto production move into recovery mode, supply/demand fundamentals look set to tighten materially in 2010," he said.

"Given that platinum consumption is projected to jump about 8% in 2010 (auto catalyst consumption moving up some 9%) and palladium demand about 10% (auto catalyst consumption moving up some 20%), PGM supply/demand fundamentals are set to tighten materially as well," Melek advised.

Noting that North American auto inventories are quite low and plants previously closed are reopening, Melek said current demand for metal should be good as plants restock. "This implies strong prices for industrial precious metals, placing them among BMO's top commodity picks."

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