LONDON -- Gold dominated commodity headlines in 2009 for its record breaking rise but it's palladium that analysts forecast to shine this year, according to a poll conducted by Dow Jones Newswires.
Dow Jones asked 41 analysts at investment banks, trading houses and research organizations across the globe for forecasts on metals prices in 2010 and 2011.
The poll shows analysts expects palladium to average $418 a troy ounce this year, up 58% from the 2009 traded average of around $265.
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Reuters
A tray with palladium ingots prepares for final weighing and packaging in a room at the Krastsvetmet plant in the Siberian city of Krasnoyarsk in November.
.The rise will be driven by investor flows aided by the new exchange traded fund products in the U.S., as well as the risk that supply falls short of demand if industrial demand from auto makers improves as economies recover, those polled said.
"With industrial demand supposed to pick up, we prefer the platinum group metals over gold and silver," Swiss & Global Asset Management Ltd. said. The group manages the Julius Baer Funds.
Palladium has the added bullish backdrop of the possibility that Russian stockpile sales don't materialize this year, said Tom Kendall, an analyst in London at Mitsubishi Corp.
Russia has a stash of palladium stocks of an unknown amount. Sales from them have kept the metal in surplus, but without them the palladium market would be in a deficit. Autocatalyst maker Johnson Matthey predicts the stocks should decline significantly after 2011.
The participants haven't turned bearish on gold, however, and forecast the metal to hit yet another record high this year despite concerns that the market has formed a "bubble" that could pop.
The poll participants predict an average gold price of $1,149/oz for 2010, which is 18% higher from the 2009 traded average of $973/oz. The metal rose roughly 40% from the end of 2008 to a record high of $1,226.30/oz on the spot market at the beginning of December 2009. The poll indicates the rise won't be as steep this year.
Analysts polled said the major risks to a higher gold price are signs that interest rates may begin to rise and the U.S. dollar to strengthen.
"Anticipated changes in monetary policy in 2010, notably the withdrawal of exceptional quantitative easing measures or the tightening of policy rates in Asia, can act to reduce investor interest," said BNP Paribas analyst Anne-Laure Tremblay.
The decision by the People's Bank of China to increase the yuan reserve requirement for banks sparked concerns that the country will seek to cool the potential of bubbles forming in asset classes there by removing some liquidity from the markets.
But Tremblay said those concerns could be countered by a fear of inflation and gold is a popular investment to protect against that risk.
VM Group said more speculative demand will fuel gold in 2010 but "probably at a slower pace, with hiccups along the way." It cautions investment towards the end of the year, however, as markets begin to price in the probable return of interest rate rises in the U.S. and other mature economies in early 2011.
For silver, the respondents predict an average of $18/oz for 2010, which is up 22% from the 2009 traded average of $14.7/oz. Platinum is meanwhile forecast to average $1,542/oz in 2010, up 28% from the 2009 traded average of roughly $1,207/oz.
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