The Hindu Business Line : Gold, silver to weaken in 2009 on easing inflation

Gold’s investment demand is expected to recede, and lead to an average price of $850 in 2009. Even for the rest of 2008, risks are still present in the form of waning support on the demand side.

G. Chandrashekhar

Mumbai, Aug 5 Given the continued financial market turmoil in addition to geopolitical concerns, inflation fears, weaker dollar and lower US interest rates, the positive market fundamentals for gold remain in place which should support the yellow metal as a safe haven investment, according to a precious metals review by London-based Natixis Commodity Markets.

The favourable factors should see gold prices average a little under $970 an ounce over the remainder of the year, producing an average for the full year of $940, the agency observed, adding the sentiment is likely to wane in 2009 and drive prices lower again due to a combination of rising short-term US interest rates, start of dollar recovery phase and an easing of inflationary expectations.

Demand recedes

As such, investment demand is expected to recede, and lead to an average price of $850 for next year. Even for the rest of 2008, risks are still present in the form of waning support on the demand side of the gold market, the review pointed out adding jewellery demand has been vulnerable to high and volatile prices.

Volatile silver

As for silver, Natixis said, the combination of investment and the market’s demand and supply fundamentals is expected to produce an annual average price of $17.85 for the calendar year 2008 representing a gain of 33 per cent on a year earlier. Silver is likely to see notable periods of volatility in the coming months as prices respond to diverging factors, with investment aiding silver market while GDP growth concerns may push silver lower. The agency has forecast silver prices to dip in 2009 and yield an average price of $16.