iti Investment has forecast a consolidation in the LME copper price as Chinese copper imports decline over the next couple of months due to very high copper prices.

“Short term upside for base metals may be limited,” Citi advised, “but we expect gains for most of them in the medium term. Aluminum and copper are our favorites.”

Citi also revised its short and medium-term forecasts for gold to $1,450/oz. However, Citi analysts suggested that medium term, “silver could outperform gold if global industrial production keeps recovering.”

With a large deficit now likely in 2011, “copper seems likely to push into the mid $8000s over the coming few months and above $9000 by mid-2010,” Citi commodity analysts said in recent commodity price forecasts.

In their analysis, Citi warned, “A number of important Chile mines are due to negotiate new wage agreements over the next few months. So far, mine unions have rejected early offers.”

“Labour strikes remain a significant upside risk, particularly with prices at such high levels: workers will hold out for a large share, while mining companies will be reluctant to lock in at such high levels,” Citi predicted.

Meanwhile copper mine supply growth remains sluggish “Scrap supply is strengthening, and could be expected to rise over the next few quarters in response to high prices.”

The analysts advised that recent safe haven demand for gold still holds “as there are significant tail risks to the global economy, such as the ongoing sovereign crisis in Europe and deflationary risks in the U.S. and other G10 economies.”

However, Citi also noted that physical gold demand is being hurt by prices at record highs “though demand should be reasonable during the Indian festival season.”

“We have revised our short and medium-term forecasts upwards to $1450/oz. We expect prices to rally further short term, but we have less conviction for sharper moves one year from now,” Citi forecast.  “As the global recovery gains tractions and policy actions start being unwound, gold prices will look vulnerable.”

In their analysis, Citi observed that silver “has broken above the pre-global financial crisis high of around $21/oz set in mid-March 2007.”

“Silver has indeed outperformed gold in the recent rally, leading to a fall below 60 in the gold/silver ratio,” the analysts said.

“The strong silver rally is also likely related to the fact that global industrial production has recovered to pre-crisis levels. If the industrial cycle continues to improve, demand for the metal should remain robust,” Citi forecast, adding mined silver production “is likely to make only modest gains over the next year.”

“We also noted that silver is heavily traded by the speculative community, and is vulnerable to sharp pullbacks,” the analysts said.

“We have raised and short and medium-term [silver price] forecasts to $25/oz from $20/oz previously. The new forecasts imply a fairly stable gold: silver ratio of 58 (compared to 58.7 currently).”

In their analysis, Citi observed that iron ore prices have been much more stable in recent weeks to around US$141/t, following higher volatility in the first half of this year.

“We expect the iron ore market to be closely balanced in 2010 and 2011 and our prices forecasts are unchanged.”