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HSBC Precious Metals Outlook

HSBC Precious Metals Outlook

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Published by: afonteve on May 10, 2011
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08/21/2012

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abc
Global Research
 
 
For gold, unease about monetary andfiscal policies should rekindle the rally;supply is likely to rise modestly
 
For silver, strong industrial demand anda recovery in investor appetite shouldoffset mine and scrap supply growth
 
Industrial demand is boosting PGM off-take; ETFs hold sizeable metal; erodingRussian stocks may buoy palladium
We are raising our average price forecasts for gold, silver,and the platinum group metals and introducing forecastsfor 2013
(see the table below). The bull markets remainessentially intact for gold and the PGMs, and although silver ispriced closer to its equilibrium value, its near-term bias isupward, in our view.
Gold:
Prices have retreated from record highs. But they shouldremain buoyed by investor concerns about the global economy,geopolitical risks, high commodity prices, easy monetarypolicies, and fiscal profligacy. Increased mine output, amplescrap supplies, and moderate jewelry demand are freeing upmetal for the investment sector.
Silver:
Prices have corrected sharply from 31-year highs nearUSD50/oz. Higher mine and scrap supplies are being absorbedby robust industrial off-take. Investors have favored silver andcoin sales, but prices appear high, especially relative to gold.
PGMs:
Moderating growth in auto demand and robustindustrial off-take are offsetting slow growth in mine supply.Platinum jewelry demand is moderating. PGM ETFs holdconsiderable amounts of metal. Widespread belief that Russianstockpiles are near exhaustion supports palladium prices.
HSBC precious metals average price forecasts (USD/oz)___2011_______2012_______2013____Long term__OldNewOld New Old NewOldNew
Gold 1,4501,5251,300 1,500 — 1,4501,0501,250Silver 263420 29 241520Platinum 1,7501,8501,650 1,750 1,6501,6001,625Palladium 750825650 750 725600700
Source: HSBC
CommoditiesGlobal
Precious MetalsOutlook 
Bound to rebound; raising our priceforecasts
10 May 2011
James Steel
 AnalystHSBC Securities (USA) Inc.+1 212 525 6515 james.steel@us.hsbc.comView HSBC Global Research at:http://www.research.hsbc.com
Issuer of report: HSBC Securities (USA) Inc.
Disclaimer & Disclosures
This report must be read with thedisclosures and the analyst certificationsin the Disclosure appendix, and with theDisclaimer, which forms part of it
 
 
3CommoditiesGlobal10 May 2011
abc
 
Gold
Increasing our gold price forecasts
Given the prevailing macroeconomic conditions andgold’s proven utility as an inflation hedge, a safe-haven instrument, and a portfolio diversifier, we areraising our forecasts of average gold prices for:
 
2011
to USD1,525/oz from USD1,450/oz.
 
2012
to USD1,500/oz from USD1,300/oz.
 
The long term
(five years) to USD1,250/ozfrom USD1,150/oz.
For 2013,
we are introducing an average priceforecast of USD1,450/oz.
Cocktail of factors ushers gold to newhighs
The 10-year gold rally remains intact, despite therecent steep pullback in prices. Prices had reacheda new high of USD1,575/oz as investorscontinued to seek out bullion for its inflationhedge and safe-haven qualities. The most virulentphase of the gold rally can be traced to the globaleconomic and financial crisis, which began inmid-2007, and the subsequent unprecedentedmonetary and fiscal responses. Investors’ appetitefor gold was increased by inflationary concernsthat were prompted by highly accommodativemonetary policies, including quantitative easingand huge fiscal spending increases throughoutmember states of the Organization for EconomicCooperation and Development (OECD), and aflight to safe-haven investments.Easy accommodative monetary policies by the USFederal Reserve stimulated already high demandfor commodities, notably – but not exclusively –in the emerging world. In addition to higher oilprices, agricultural prices surged, which promptedthe UN’s Food and Agricultural Organization todeclare a global food crisis earlier this year.Commodity price rises fanned inflation fears andstimulated demand for hard assets, including gold.The eruption of popular discontent in the MiddleEast, in particular the civil war in Libya, withimplications for oil supply disruptions, raised theglobal geopolitical risk thermometer, which
Bound to rebound
 
Despite the steep pullback in gold, concerns aboutthe inflationaryimpact of highly accommodative monetary polices, deficitspending, and high commodity prices should rekindle the rally
 
Silver has retreated; investor sentiment will be crucial to pricedirection; strong industrial demand is more than offsetting minesupply growth but greater scrap supply may help weigh on prices
 
PGMs are benefiting from growth in global auto production androbust industrial demand; ETFs hold considerable metal

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