Saturday, January 15, 2011

Silver sprint may slow down; copper, aluminium to shine

A rally in non-food commodities has taken bullion and a few base metals to new highs in 2010. The high prices in these commodities were the result of huge fund flows and hopes of improved economic prospects. From the investment perspective, silver has been the outperfomer followed by nickel, copper and gold while crude oil has lagged. Interestingly, brokers are divided on the prospects of the precious metals while forecasting, albeit with riders, a bullish outlook for base metals and crude oil. The caution stems from the strength of global economic recovery.


Silver has yielded a return of over 70% over the past year while gold has trailed returning 26.8%. The high price of gold led investors to look at silver as an alternative, which benefitted from an increased industrial demand. Unlike gold, silver takes cues from base metals since it doubles up as an industrial metal used in photography, jewellery and electronics.

Gold is up over 20% in the year-to-date, flirting with the $1400 an ounce (31.10gm) chiefly due to a falling dollar and safe-haven buying. Interestingly, buyers, especially in emerging markets such as India, are looking at jewellery as an investment. Citing World Gold Council data, Angel Broking says global demand for gold in the third quarter stood at 922 tonnes, an increase of 12% from year-ago levels. Global jewellery demand has been increasing — 8% from Q3 2009, led by rising demand from India (the largest consumer), China (the second largest), Russia and Turkey.

In the first half of 2010, India’s jewellery demand increased by 67% to 272 tonnes. “The major beneficiary of the economic worries in the Euro zone was the bullion pack,” says Naveen Mathur, associate director (commodities & currencies), Angel Broking. “The price rise is expected to continue as slow recovery in the US and the Euro Zone will act as supportive factor for gold prices.”


While Angel Commodities is bullish on the prospects of gold and silver, another commodity broker, Geojit Comtrade, forecasts a sideways to bullish outlook for gold in the range of $1200-1500 an ounce, and a weak outlook for silver in 2011 with the possibility of a 10-15% correction in prices.

1 comment:

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