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precious metals

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Precious metals are expected to build on a stellar 2010 this year as risk aversion and persistently low interest rates boost their allure, a Reuters poll showed on Tuesday.

Expectations for gold's performance have risen sharply, with the survey of 65 leading analysts, traders and fund managers predicting gold will average $1,450 (U.S.) an ounce this year, well above its record high of $1,430.95 an ounce. They predict an average of $1,420 in 2012.

A similar poll in July found most respondents expected gold to average $1,228 an ounce in 2011. Last year the average LBMA gold fixing was $1,225.60 an ounce.

For silver, they expect a 2011 median price of $29.83, falling to $27.90 in 2012.

Below are a selection of comments from respondents to the survey. All prices are in U.S. dollars per ounce.

JAMES STEEL, ANALYST, HSBC "We believe that gold will continue to attract safe-haven buying from risk-averse investors this year, as European Union sovereign debt concerns persist. The Federal Reserve is likely to continue with its program of quantitative easing (QE) in 2011 to prevent deflation from taking root, while the pace of economic activity in the emerging world will likely remain strong, igniting inflation fears...The combination of continued QE in the U.S. and rising inflation pressures in the emerging world is a particularly bullish cocktail for gold."

HOU XINQIANG, ANALYST, JINRUI FUTURES "Changes in the geopolitical situation will trigger changes in foreign policies and relations between major countries, which may influence gold prices. The economic recovery in the U.S. and the euro zone is another key issue which will drive gold prices. In addition, market liquidity, which is mainly determined by the shifts and timing of shifts in monetary policies in the euro zone and the U.S., will amplify moves in gold prices. Speculative buying has been a key player in gold's rally in the past two years and will continue to push prices in the future. On the demand side, emerging markets, such as India and China, should be closely watched."

ROBIN BHAR, ANALYST, CREDIT AGRICOLE "There are enough things to keep us worried going forward. In a year's time, hopefully there will have been some kind of resolution of the euro zone debt situation, and maybe then we will start to worry about the U.S. deficit or the deficit in Japan. So the fear factor won't totally be alleviated. There will always be something that the markets will have to worry about. For portfolio diversification, there will still be people wanting to diversify further into gold."

ONG YI LING, ANALYST, PHILLIP FUTURES PTE "The slow and uneven recovery of the global economy will likely mean relatively loose monetary policy to stimulate growth. The U.S. Fed has to unwind its asset purchases first before raising interest rates. It is thus unlikely to raise rates until the end of 2011. Gold could be sought as a hedge against uncertainty and alternative currency. Should gold prices trend higher, other precious metals may also benefit from their positive correlation with gold."

SUGANDHA SACHDEVA, RESEARCH ANALYST, RELIGARE COMMODITIES "One more factor that will... drive gold prices will be the launch of China's first fund Lion Global Gold Fund, (which) will invest in gold-backed exchange traded funds overseas. This fund could bring about a new wave of investment demand in the country, and more such funds might enter the market."

SILVER:

TOM KENDALL, ANALYST, CREDIT SUISSE "When you look at the chart for silver since the back end of August last year, you have to think that rate of appreciation in the price surely can't continue, and I don't think it can in the coming 12 months. But definitely the sentiment towards silver from much of the investment market is still positive, and industrial demand is strong."

FREDERIC PANIZZUTTI, SENIOR VICE PRESIDENT, MKS FINANCE "We expect silver to remain in the focus, as it shall increasingly gain consideration as an alternative to gold in investors' portfolios. Increased physical buying interest and a wider community of buyers across the globe shall lead silver to reach new highs. We would not be surprised if silver picked somewhere between $45-$50 an ounce in 2011. This shall not happen without high levels of volatility and several sharp downside corrections."

DANIEL SMITH, ANALYST, STANDARD CHARTERED "Silver has outperformed gold recently, but we feel that there is now too much speculative froth in the market and it is overdue a correction. As a result, we think silver prices will pull back in the months ahead, especially if the U.S. dollar strengthens, as we expect. However, the underlying fundamentals are still good and we expect silver prices to benefit from rising gold prices in the year ahead; and industrial demand in China should remain supportive for most of 2011."