Silver Will Be Top PM Performer in 2013

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Silver will benefit on multiple fronts in 2013. As the global economy picks up, industrial demand will escalate as well. As interest rates rise to curtail inflation, silver should win again, leading experts to believe that silver will be the top performer in the group. According to Joni Teves, an analyst for UBS, “Ultimately it is still the vote of confidence coming from investors that will have the more powerful impact on the silver market. More work needs to be done to encourage market participants to become more active in silver again – less violent price action and/or a stronger price uptrend are likely to attract flows. We have held the view that silver is poised to outperform in a QE environment.

 

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January is always the time when analysts polish off their crystal balls and make their best predictions for the years ahead, hoping to garner bragging rights if they hit their marks. Predicting future events in today’s era of globalization, however, is difficult, but planning for it requires some basic understanding of how it might unfurl. In the world of precious metals, there is no shortage of prognosticators, from both conservative and aggressive extremes. If you ignore the typical outliers, prospects are for modest gains.

 

The mean average of estimates for the precious metals group, if we focus only on gold, silver, platinum, and palladium, is for price increases of roughly 8% per year for 2013 and 2014. Silver and palladium are the higher performers, while gold is slightly below other metals. Each metal, however, will post positive gains in each period if analysts are correct. Weakening currencies will also play a role, as government officials continue their quantitative easing programs to address debt issues. Metal prices can only benefit.

 

Gold

 

As the global economic recovery gathers steam and uncertainty risk diminishes, the appeal of gold as a “safe haven” would naturally lessen, according to most estimates. Some analysts believe that some pent-up demand currently exists that must be vented in the near term. Current thinking, however, is that deficit talks in the U.S. will heighten fiscal concerns, while Europe remains a question mark going forward. Add continued strife in the Arab world, and you have the “tried-and-true” recipe that has always favored Gold demand.

 

Michael Widmer, an analyst for Merrill Lynch at Bank of America, sums up the general view, “Real yields, a key gold price driver, have flat-lined across various tenors, limiting investor appetite for gold. While large output gaps in advanced nations have generally

prevented a rise of inflation and inflation expectations, a likely pick-up in growth through the end of 2013 may alter this pattern.” As the global economic recovery gathers steam, inflation will only cause Gold prices to rise, as well. Timing is the major issue.

 

Mean 2-year averages for 33+ analysts: 6.6% for 2013 and 2.8% for 2014.

 

Silver

 

Silver will benefit on multiple fronts. As the global economy picks up, industrial demand will escalate as well. As interest rates rise to curtail inflation, silver should win again, leading experts to believe that silver will be the top performer in the group. According to Joni Teves, an analyst for UBS, “Ultimately it is still the vote of confidence coming from investors that will have the more powerful impact on the silver market. More work needs to be done to encourage market participants to become more active in silver again – less violent price action and/or a stronger price uptrend are likely to attract flows. We have held the view that silver is poised to outperform in a QE environment which is friendly towards risk assets.”

 

Mean 2-year averages for 30+ analysts: 11.5% in 2013 and 10.3% in 2014.

 

Platinum

 

Analysts see platinum returns as more favorable than gold. Per Anne-Laure Tremblay of BNP Paribas, “Platinum’s demand remains affected by the poor state of the European auto sector. However, the ongoing issues surrounding platinum mine supply in South Africa should counterbalance weakness in demand. Overall, we expect the metal’s fundamentals to improve in 2013, which will be supportive of a higher price.”

 

Mean 2-year averages for 25+ analysts: 9.0% in 2013 and 6.3% in 2014.

 

Palladium

 

Declining Russian stockpiles, increased investor demand, and optimism in the gradual economic recovery in the U.S. will drive palladium prices skyward.

 

Mean 2-year averages for 24+ analysts: 7.1% in 2013 and 11.7% in 2014.

 

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