Gold Futures Index (GOLD)

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MKS Looks For Gold To Hit Record High In 2012; 'Marginally Bullish' On Silver

05 January 2012, 3:39 p.m.
By Kitco News
http://www.kitco.com/

http://www.kitco.com/reports/KitcoNews20120105AS_MKS.html

(Kitco News) - MKS Finance looks for gold to hit record highs in 2012, according to a forecast released Thursday.

The firm said it looks for fixings as high as $2,120 an ounce and an average of $1,808, with the precious metal boosted by geopolitical and sovereign-debt issues and more central-bank buying. However, the trade house also said that it looks for the market to be volatile, listing a forecast low for the year of $1,550.

The firm said it was “marginally bullish” on silver. It forecast that silver will average $36 an ounce in 2012, with a high of $50 and a low of $27.

Gold ended 2011 with a 12% gain from the prior year, MKS said.

“We expect most of the factors that drew gold higher in 2011 to continue to push the yellow metal towards a new all-time high in the course of 2012: geopolitical tensions in specific regions, sovereign-debt quality deterioration, (and) official-sector buying just to name a few,” MKS said.

The firm said it anticipates any crisis spreading over North America and Europe to further affect the liquidity in the banking system. However, such a scenario would have a two-fold impact on gold. It would initially prompt additional gold buying as a safe heaven. But, if liquidity becomes scarce, the market might start dishoarding gold scrap in larger quantities, MKS cautioned.

“Such a scenario would be even more likely if gold reached new highs,” MKS said. “Such a price correction could prompt some central banks to add on some gold to their reserves.

“The revolutionary mood that recently affected certain Middle Eastern and North African countries might be contagious to other regions and further motivate gold buying. To summarize, we expect gold to reach new highs in 2012 and to trade in a wider range. We expect 2012 to be another volatile year.”

Meanwhile, MKS described itself as “only marginally bullish” on silver, although it expects the metal to remain in focus as an alternative to gold in investors’ portfolios.

“We don’t expect the physical demand to drastically increase and the ETF inflow to remain moderate,” MKS said. “As a net importer, China will remain a key factor for the physical silver demand throughout the year. Any rally in gold could prompt speculative buying in silver, resulting in short-lived price spikes. The lack of strong physical interest and support shall dominantly result in speculative trading. Again, silver is set to remain very volatile and to trade in wide ranges with erratically rallies and sharp downside corrections.”

Platinum was forecast by MKS Finance to average $1,498 an ounce, with a high of $1,790 and a low of $1,350. The metal “disappointed” in 2011, and MKS said more of the same could occur in 2012.

“Physical demand shall remain range-bound as the industrial demand is set to further suffer from the very hesitant recovery in global growth,” MKIS said. “Some moderate inflow into ETF(s), if any, could provide some support. Any consistent upside moves in gold and silver could impact the platinum price on a temporary basis as a result of basket buying.”

MKS Finance forecast that sister metal palladium will average $662.50 this year. The firm listed a forecast high of $750 and a low of $570.

“Hesitant global growth recovery shall continue to affect industrial demand,” MKS said. “We are not expecting any wide moves in 2012. While the supply/demand balance remained fragile in 2009-2010, the expected reduction in industrial demand this year shall result in a more balanced equilibrium.”

By Allen Sykora of Kitco News; [e-mail]