Precious Metals – ‘Uptrend intact; wait for appropriate signals’

After a record ten straight years of annual gains, gold has entered a critical phase in one of its longest rallies. Markets are abuzz with contradictory views on whether gold will continue to rise in 2011. Signs of a slowdown are apparent in the short to medium-term. However, we investigate two compelling factors affecting gold prices and find out why there is no reason that the prolonged rally cannot continue well into this year as well.  Inflationary concerns are likely to be the biggest support for gold prices in 2011. Gold prices may suffer short-term damage if selling from physically-backed exchange traded funds extends for a second month. Near-term we expect that further downward pressure may be experienced in the gold market with a risk that prices could potentially fall modestly below USD1,300/oz. This could occur over the next quarter or so. Overall, we feel the gold & silver prices would be range-bound for the coming quarter with some negative bias on a very short term basis. The secular trend in gold still remains quite bullish but may see some pressure on the prices this quarter.