POLL - Precious metals seen volatile in 1998
04:04 a.m. Jan 20, 1998 Eastern
By Patrick Chalmers
LONDON, Jan 20 (Reuters) - Gold, silver, platinum and palladium look set
for increased volatility through 1998, albeit for different reasons,
according to a Reuters poll of precious metals analysts from around the
world.
Gold will average $300 an ounce for the year, silver $5.34/oz while
platinum and palladium prices will average at $393/oz and $197/oz
respectively, the poll said.
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Figures were compiled from contributions supplied by 16 metals analysts
from the bullion dealing and mining centres in London, New York, Tokyo,
Zurich, Johannesburg and Perth.
If the forecast means prove correct, gold would average nearly 10
percent down on 1997's average of daily London fixes, silver and
palladium would be about 10 percent up while platinum would stay much
the same.
Most analysts limited back-up remarks to their gold forecasts, for which
12 end-of-year figures yielded the $300/oz average figure.
South African analyst Mark Madeyski, of O'Flaherty and Co., thought 1997
gold selling had been overdone.
''I personally believe that gold has really been downtrodden, but it may
be somewhere near the bottom,'' he said, adding that while he expected
gold to improve over the course of 1998 it would be extremely volatile,
with investors grabbing profits from any sharp rallies.
Another who saw gold sales as overdone was New York-based analyst Ted
Kempf of the CPM Group.
''Investors are traditionally attracted to gold for six major reasons -
as an inflation hedge, as a currency hedge, as a portfolio diversifier,
as a safe haven from political turmoil, as a store of value and as a
commodity,'' he said.
''In 1998 most of the factors that attract investors to gold will be
present for the first time in three years. Only gold's role as an
inflation hedge will be missing.
''Investors have been distracted from gold by the explosive increase in
equities values world-wide last year, but the extended period of strong
economic conditions behind this growth appears to have peaked,'' he
added.
Dean Cunningham, gold analyst with Investec Securities Inc, Ferguson
Bros in South Africa, predicted a price boost from declining production
in major gold producing countries.
South African output would drop between 50 and 60 tonnes in 1998 from
about 485 tonnes in 1997, he said.
Merrill Lynch's London-based precious metals analyst Ted Arnold was less
upbeat, seeing lower demand and increased supply in 1998 and saying
closures were the only way out for what would be a volatile market.
''The bottom line is that we need to permanently close some 400 tonnes
of gold mining capacity,'' he said.
Analyst Hanspeter Hausheer of SBC Warburg Dillon Read in Zurich saw
possible central bank sales, price hedging by mines and lower demand
from Asia amid the financial markets crises as all weighing on gold
through the year.
''If India is swept into the maelstrom soon, then we will have to review
our forecasts. Our prognosis is based on the scenario that India is not
affected or affected only marginally by the turbulence,'' he added.
Kamal Naqvi, precious metals analyst for Macquarie Equities in London,
said that both gold and silver would both face a ''tale of two halves''
for 1998, albeit in mirror image of one another.
For gold, there would be uncertainty about central bank sales,
disinflation fears, dollar strength and dishoarding in Southeast Asia,
encouraging gold to sit on lows at around $280/oz in the first half.
The second half should see greater clarity on European Central Bank
reserve policy, expectations of U.S. inflation, mine closures and
stability in Asia, all helping to shore up the price, Naqvi said.
For silver, speculators would have a window of time during which to push
the price towards $7.00/oz until increased mine supply and falling
Indian and Japanese demand kick in to knock the price back towards
$5.00, he said.
London analyst Tony Warwick-Ching of Flemings Global Mining Group also
raised questions about Indian demand for silver and added that the gold
/silver ratio would be unsustainable for long below 55.
It is currently below 50, where it has been since December 10.
James Steel, an analyst for Refco New York, saw silver prices as
volatile, saying: ''Silver is suffering from volatility due to hedge
fund plays, but the underlying fundamentals still look OK, as they do
for platinum and palladium, especially if we get another extended period
of Russian supply interruption.''
Japan, as a major consumer of platinum and palladium, has more reason
than most to look ahead with care.
Yukuji Sonoda, president of Sumisho Gold Co Ltd, one of Japan's major
bullion houses, saw palladium averaging $220/oz in 1998 with continuing
questions about supply delays from Russia.
''As Russia supplies about 60 percent of the world's palladium, the
delay will have a substantial impact on prices,'' he said, adding that
platinum would be affected less given the smaller percentages of total
supply at stake.
But Nobufumi Iimori, manager of the commodities investment division of
Nihon Unicom Corp, the Japanese commodity brokerage, saw volatility
ahead for both platinum group metals (PGMs).
''They will surge in the first half due to a delay in Russian PGM
delivery, but prices are expected to retreat once Russia resumes PGM
shipments,'' he said. ((London Newsroom +44 171 542 8057.
london.commodities.desk+reuters.com))
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