24 Mar 2012 Last updated at 12:32:49 GMT

Short term risks for precious, base metals but patience to be rewarded

LONDON (Scrap Monster):  Short term risks to precious and base metals investors’ “patience to be rewarded” in the longer term, said TD Securities in a briefing.

Slowing income growth in China, higher taxes on gold imports in India and dying hopes of more U.S. quantitative easing mean short-term downside risks to gold, TDS said.

Less-robust demand in China and any disappointments in U.S. economic data mean risks for platinum, palladium, copper and other industrial metals, TDS says. Still, TDS describes the commodity picture as “positive” for the longer term.

“With the Fed likely keeping interest rates at record lows well into 2014 and recent massive Fed/ECB monetary base expansions not getting unwound anytime soon, the global financial system will be flush with cash for the foreseeable future,” TDS added.

“Also, with the global economy expanding in a more solid way in the second part of the year coupled with energy remaining high and feeding into inflation, investors should get more excited about gold as a safe haven well into 2013,” they continued.

Meanwhile, industrial metals should draw support from easier monetary policy and government fiscal action in China, plus a Western world recovery that tightens these markets and lifts prices.

 “Supply constraints present in the palladium and copper markets will likely make these commodities join the group of the biggest winners this year,” TDS concluded.

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