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NOOB
15th June 2010, 06:57 PM
Investor gold appetite will drive prices
Dorothy Kosich
Monday, June 14, 2010
www.mineweb.com
RENO, NV

Barclays Capital Commodities Research believes the motives for buying gold remain intact and that investor appetite should drive prices higher. "But for the base metals there is an exaggerated sense of doom and gloom with the economic scenario currently being priced in," Barclays analysts advise.

In their recently published research, Barclays analysts assert "prices have begun to eat into the cost curve of a number of metals. "Prices are hacking furthest into the aluminum cost curve, with a large chunk of production now making a loss; this is also true for a small portion of zinc and nickel mine output."

Meanwhile, Barclays' analysis also suggests, "Despite their precious metals status, the PGMs have been unable to escape unscathed, sidelining fundamentals. Analysts Gayle Berry, Suki Cooper, Natalya Naqvi, Kevin Norrish and Nicholas Snowdon said, 'We expect platinum fundamentals to be constructive this year, predominantly as the demand picture becomes increasingly positive given the launch of the US ETP production coinciding with an expected recovery within the auto and industrial sectors."

Barclays maintains a positive bias toward both platinum and palladium, "given our expectations for auto and industrial demand to rebound, as well as strong physical investor appetite, and expect platinum and palladium prices to average $1610/oz and $450/oz in Q3 and $1710/oz and $495/oz in Q4, respectively."
PRECIOUS METALS

In Barclays' view continued strength in investor appetite should drive gold prices higher, and the motives for buying gold remain intact for now.

The analysts anticipate only "modest growth in jewellery sales this year from its lowest levels in over 20 years."

Nevertheless, Barclays expects jewellery consumption to rebound as the economy grows in key gold-consuming regions, "yet we believe this will be partially offset by the stronger gold price driven by investment demand hampering consumer interest."

Meanwhile, Barclays forecasts that silver mine supply will grow for the seventh consecutive year "with continued gains from primary mines and another drop in official sector sales." However, the analysts expect a modest rebound in silver scrap due to increased electrical sector activity.

"We expect overall supply to rise 3.2% y/y but expect fabrication demand to rise 5.1% y/y as industrial output rebounds and jewellery demand grows as a cheaper option to gold."

"Despite the sharper recovery in demand, the market is set to remain in surplus and, thus, dependent on investors," the analysts forecast."For now positive sentiment towards gold also favours silver and is likely to push prices higher, but the largest source of upside potential is also the largest source of downside potential is also the largest source of downside risk should investor appetite turn less supportive."