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Commodities Forecast – Silver, Gold, Crude Oil Prices

May 29th, 2009 Posted in Oil and Precious Metals Bookmark and Share

Gold prices jumped to their highest level in 3 months on Friday, finding support as a hedge against fears of higher inflation and a broad rise in commodity prices. Investor sentiment remains positive and a weaker dollar is likely to spur investors to increase their exposure to Gold, according to analysts.

The precious metal has risen about 1% this week and has gained about $80, or 9%, this month, putting it on track for its biggest monthly rise in 6 months. Gold seems to be getting support from oil, as high oil prices can lead to fears of inflation. Furthermore, Gold and Oil might move together at times as both are seen in some way as real commodity investments.

In the near term, the dominant theme behind moves in Gold appears to be moves in the U.S. dollar rather than inflation expectations. This trend for rising Gold prices is likely to persist, with $980 an ounce as the next price target.

Silver prices surpassed $15 an ounce on Thursday for the first time in more than 9 months, rising more than 2% as hopes for an economic recovery raised inflation concerns. The metal which is seen as a hedge against inflation, has already gained 34% since the beginning of this year.

Trading in Silver has also signaled investors’ hopes for an economic recovery. Economic optimism was reinforced Thursday by a pair of U.S. government reports that showed the number of new layoffs declined last week and durable-goods orders rose more than predicted last month.

Silver prices are benefiting from strong investment demand for the metal, as investors are buying the metal as a cheap proxy for Gold. It too is being seen as a good portfolio diversifier to hedge against Dollar weakness and inflation. For the week ahead further upside is expected, with 15.57 and 16.00 in sight.

Crude Oil
Crude Oil prices headed for their biggest monthly gain in a decade, prices jumped to a 6-month high on Thursday after the Energy Department weekly report showed a drop in inventories. Oil prices have already jumped around 30% this month and rose to a new high above $66 per barrel on Friday, after Japanese and U.S. data suggested the economic downturn may be moderating.

Better U.S. durable goods orders figures on Thursday also reinforced the sense that the global economic slump might be abating, despite a disappointing U.S. home sales report. Separately, the Organization of the Petroleum Exporting Countries (OPEC) decided on Thursday to maintain its current production levels. OPEC Secretary General said that Crude prices should remain in a $60-to-$70 a barrel range for the rest of the year. The minister forecasted that Oil may rise to $75 a barrel by this year’s 3 or 4 quarter. The group’s next meeting will be on Sept. 9, he said.

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