Palladium may fare better than other precious metals in 2011 due to continued strength in the automobile sector in emerging-market nations at a time of tight supplies, said “The Metals Monthly” report released by ABN AMRO Bank and VM Group Thursday.
Analysts described copper and tin as the base metals that may fare best.
However, while they that while sentiment for metals is bullish for now, there are potential headwinds that could derail expected rises in both base and precious metals. In particular, analysts cited any strength in the U.S. dollar due to economic recovery, potential interest-rate hikes, euro-zone debt distress and attempts to mitigate inflation in China.
VM Group looks for palladium to average $798 an ounce in 2011, compared to an average of $525 for 2010. The metal rose strongly last year due to growth in sales of new vehicles in China, India and other parts of the emerging world. The main industrial use for palladium is auto catalysts.
“There appears little reason for this growth to slow appreciably in 2011 and thus the prospects for the palladium price in 2011 are just as compelling,” the report said. “With auto-catalyst demand therefore likely to grow strongly in 2011, a small market deficit will develop as supply fails to keep pace. This will be compounded by dwindling sales from Russian state stockpiles.”
For other precious metals, the average 2011 forecasts are gold, $1,457 ($1,225 in 2010); silver, $29.63 ($20.13); and platinum, $1,783 ($1,609).
VM Group looks for the average gold price to rise but also anticipates a “bumpy ride” in which investment demand will be critical. Analysts look for the “near-zero interest-rate environment” to persist in the U.S. and Europe for much of the year, which should benefit gold as well as equities.
“The rise in the Chinese and Indian middle class will continue to support demand, while political uncertainty in the Middle East and North Korea and potential currency conflicts might lead to price spikes,” the report said. “There will–unsurprisingly–also be periods where euro-zone debt issues resurface, momentarily increasing gold’s allure as a hedge against sovereign risk.”
However, an offsetting factor would be a stronger dollar as signs of a U.S. economic recovery become more evident, VM Group said. The end to major dehedging by gold miners also takes away a source of buying, and government austerity measures in some nations could have the impact of suppressing jewelry demand.
Three-months copper is forecast by VM Group to average $9,150 a metric ton in 2011, compared to $7,537 last year. Tin is forecast to average $26,523 a metric ton in 2011, up from $20,401 for 2010.
“Copper looks likely to be the star performer of the base metals in 2011,” said the report, citing sentiment that “demand growth in China will be coupled with greater appetite in the U.S. and elsewhere.” Meanwhile, supply has not kept pace with demand, which should mean a market deficit of some 450,000 metric tons, VM Group said.
Analysts also describe themselves as bullish on tin, anticipating further supply disruptions but demand from the electronics sector to grow, with a potential deficit of 20,000 tons.
Other 2011 base metals forecasts include nickel, $23,625 (compared to $21,844 for 2010); zinc, $2,348 ($2,187); aluminum, $2,331 ($2,176); and lead, $2,329 ($2,190). Source: Commodityonline
Analysts described copper and tin as the base metals that may fare best.
However, while they that while sentiment for metals is bullish for now, there are potential headwinds that could derail expected rises in both base and precious metals. In particular, analysts cited any strength in the U.S. dollar due to economic recovery, potential interest-rate hikes, euro-zone debt distress and attempts to mitigate inflation in China.
VM Group looks for palladium to average $798 an ounce in 2011, compared to an average of $525 for 2010. The metal rose strongly last year due to growth in sales of new vehicles in China, India and other parts of the emerging world. The main industrial use for palladium is auto catalysts.
“There appears little reason for this growth to slow appreciably in 2011 and thus the prospects for the palladium price in 2011 are just as compelling,” the report said. “With auto-catalyst demand therefore likely to grow strongly in 2011, a small market deficit will develop as supply fails to keep pace. This will be compounded by dwindling sales from Russian state stockpiles.”
For other precious metals, the average 2011 forecasts are gold, $1,457 ($1,225 in 2010); silver, $29.63 ($20.13); and platinum, $1,783 ($1,609).
VM Group looks for the average gold price to rise but also anticipates a “bumpy ride” in which investment demand will be critical. Analysts look for the “near-zero interest-rate environment” to persist in the U.S. and Europe for much of the year, which should benefit gold as well as equities.
“The rise in the Chinese and Indian middle class will continue to support demand, while political uncertainty in the Middle East and North Korea and potential currency conflicts might lead to price spikes,” the report said. “There will–unsurprisingly–also be periods where euro-zone debt issues resurface, momentarily increasing gold’s allure as a hedge against sovereign risk.”
However, an offsetting factor would be a stronger dollar as signs of a U.S. economic recovery become more evident, VM Group said. The end to major dehedging by gold miners also takes away a source of buying, and government austerity measures in some nations could have the impact of suppressing jewelry demand.
Three-months copper is forecast by VM Group to average $9,150 a metric ton in 2011, compared to $7,537 last year. Tin is forecast to average $26,523 a metric ton in 2011, up from $20,401 for 2010.
“Copper looks likely to be the star performer of the base metals in 2011,” said the report, citing sentiment that “demand growth in China will be coupled with greater appetite in the U.S. and elsewhere.” Meanwhile, supply has not kept pace with demand, which should mean a market deficit of some 450,000 metric tons, VM Group said.
Analysts also describe themselves as bullish on tin, anticipating further supply disruptions but demand from the electronics sector to grow, with a potential deficit of 20,000 tons.
Other 2011 base metals forecasts include nickel, $23,625 (compared to $21,844 for 2010); zinc, $2,348 ($2,187); aluminum, $2,331 ($2,176); and lead, $2,329 ($2,190). Source: Commodityonline
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