Gold, Silver Set to Rise - Scotia

If those zany cash-for-gold-now ads on TV are catching your interest you should probably switch them off as commodities prices are set to jump in the coming months, a new Scotia Capital note says.

While gold and silver prices have not seen their annual summer pullback this year, they have remained "stagnant" and are likely to stay flat until August.

David Christie, geology analyst, said in a note to clients Monday:

With a small increase in investor and physical fabrication demand, prices will move much higher durign the seasonal rallies of August-September and November-February. We believe that over the next month investors should move to overweight gold and silver equities in anticipation of higher commodity prices.

Mr. Christie has increased his five-year average gold price 3% to C$956 per ounce, while upping his five-year silver price 14% to C$12.81 per ounce.

Long-term gold prices, starting in 2016, have also been bumped 7% to C$750 per ounce from C$700 per ounce. Mr. Christie also raised his long-term silver estimates to C$11 per ounce from C$11.

"As we move deeper in 2009, we believe that investment demand will continue to be the driving force for gold demand, especially in the West," he said. A weaker U.S. dollar in the fall and rising inflation concerns in early 2010 are also cited as further factors for firming commodities prices moving forward.

Meanwhile, Scotia Capital has downgraded Kinross Gold Corp. (KGC) to Sector Perform due to market price appreciation, while upgrading Pan American Silver Corp. (PAAS) to Sector Perform. Minefinders Corporation Ltd. (MFN) has also been upgraded to Sector Outperform due to the rising prices.

Comments

[Larry House:]

I like gold and silver as must-have type assets, but I can't buy your thesis. Just a weak dollar does not mean inflation. Inflation is further off than 2010. I don't see sufficient push for significantly higher prices from the points you have mentioned. We are still deflating. This is not the time for gold and silver to really shine--except in my safe.

Did you get your numbers right on the estimates for silver? Proof read and see if you did.

Jul 07 03:46 PM

[nmelendez:]

It's not about deflation. If earnings start coming in lower due to demand destruction where do you park your money? Bonds go down, equities go down, dividends go down so where do you go?
My guess is Precious Metals (PM). Gold is limited in supply. Right now gold investment is only .6% of all equities. Imagine if it goes up to 5 or 6% due to demand from India and China, 2.5 billion more customers. :). Thats the real secret. Gold is limited and as the supply and demand equation turns in favor of demand it's price will go up.


On Jul 07 03:46 PM Larry House wrote:

> I like gold and silver as must-have type assets, but I can't buy
> your thesis. Just a weak dollar does not mean inflation. Inflation
> is further off than 2010. I don't see sufficient push for significantly
> higher prices from the points you have mentioned. We are still deflating.
> This is not the time for gold and silver to really shine--except
> in my safe.
>
> Did you get your numbers right on the estimates for silver? Proof
> read and see if you did.

Jul 07 06:16 PM

[Dr. O:]

If the multi-year correlations continue to hold up, the unfolding decline in stock markets should bolster the US Dollar, and send commodities including oil, and precious metals lower. A perfect buying opportunity: gold around $700 and silver around $10.

Jul 07 07:42 PM

[I need more...:]

Yeah, like a ball falling towards a floor that is moving downward, gold and silver are set to rise. That is, once they stop falling.

Jul 08 07:42 AM

[Rene Cohrt:]

Gold and silver as a lifeinvestmet I don't understand, but as wealthinsurance they are unsurpassed.

Jul 08 08:42 AM

[TXFLYGUY:]

In reply to the first comment, the definition of inflation is the devaluation of the dollar. And just look at the Yen/Dollar or the Euro, plus the printing presses at the U.S. Mint are running 24/7. Factor in China and India calling for an end to the dollar and.............you have inflation. Gold is the place to be.

Jul 08 09:20 AM

[Francis Sch...:]

Inflation and deflation are monetary hapenings...During a (hyper)inflationary depression, the prices of LOCG rise and those of HOCG fall.
Apparently many still don't know the definition of inflation is and don't understand monetary inflation always result in price inflation whatever the economy is.


On Jul 07 03:46 PM Larry House wrote:

> I like gold and silver as must-have type assets, but I can't buy
> your thesis. Just a weak dollar does not mean inflation. Inflation
> is further off than 2010. I don't see sufficient push for significantly
> higher prices from the points you have mentioned. We are still deflating.
> This is not the time for gold and silver to really shine--except
> in my safe.
>
> Did you get your numbers right on the estimates for silver? Proof
> read and see if you did.

Jul 08 09:34 AM