Gold bullish, silver volatile, ‘as no quick fix' to global financial crisis is likely

ScotiaMocatta says silver outperformed gold last month, but volatility in silver is likely to remain high. PGM ETFs rising.

RENO, NV - 

In a recently published analysis, ScotiaMocatta said the medium outlook for gold remains bullish "as no quick fix to the global problems is likely."

"However, we feel gold will remain highly sought after regardless of whether we see deflation or inflation, as people seem to be turning to gold as a hedge against money and economic disorder," ScotiaMocatta noted in its March 2009 issue of Metal Matters.

Silver enjoyed a strong run last month which saw the metal's price rise 16% compared to gold's 11% rise.  ScotiaMocatta found that since the lows in October 2008, silver has climbed 71% compared to gold's 48%.

"The fact silver has outperformed gold to such an extent is particularly interesting considering silver is an industrial metal as well as a precious metal. However, this highlights the fact that silver is seen as a cheaper way into the precious metals market and because it is a smaller market, moves tend to be exaggerated."

While silver prices are now correcting and the pull back may have further to run, ScotiaMocatta advised "the overall financial climate is bullish for safe haven investments and silver is well placed to benefit from that. That said, given so much depends on investment interest remaining strong, volatility in silver is likely to remain high."

Meanwhile, ScotiaMocatta also noted platinum ETFs grew by 68,869 ounces in February to 382,128 ounces, which is now 71% above the correction low seen at the end of October. Palladium ETFs climbed to 104,265 ounces, which was a new high.

"Generally the longer term outlook for both PGMs is bullish, but palladium may have more upside opportunity as it has a big price advantage over platinum and on the supply side there is the likelihood that at some stage Russian sales from stockpiles will stop."

 "Given the poor industrial and fabrication demand outlook it would not be surprising to see PGM prices struggle on the upside and therefore we would not chase prices higher. However, we expect good underlying buying to support shallow up trends," ScotiaMocatta noted.

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