HardAssetsInvestor

Written by Sumit Roy  |

January 31, 2012

Precious Metals Monitor: Gold Will Test $1800 In Feb., Silver Poised To Perform Even Better

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We offer our latest analysis on the precious metals market.

The year 2012 continues to treat precious-metals bulls extremely well. Over the past week, gold, silver, platinum and palladium all notched fresh multiweek highs. The fundamental and technical backdrops remain extremely favorable for a continuation of the uptrend.

On the fundamental side, investor-risk appetite is firm. Stock markets have been trending upward and credit conditions remain mostly stable.

The S&P 500 Stock Index is near six-month highs, though it has recently begun to correct modestly on profit-taking. The Italian and Spanish debt markets, which were seen as the major areas of concern for the eurozone and the global economy, are much better behaved now compared with only several weeks ago.

Italian and Spanish 10-year bond yields were last trading at 5.96 percent and 5 percent, respectively, down significantly from their euro-era records of 7.48 percent and 6.78 percent set last year.

That is, of course, a mixed blessing for gold and silver. On the one hand, financial markets are no longer facing the risk of a catastrophic financial shock in which one of those countries defaults. That has served to increase investor appetite for risk assets, precious metals included. On the other hand, less risk reduces the appeal of safe havens such as gold and silver.