Market participants, such as U.S. investment bank Morgan Stanley, now cite gold as their top commodity play for 2012, due to the uncertain macroeconomic environment. Many analysts predict the muddied global economic outlook will boost gold prices to all-time highs next year, with a break above $2,000 an ounce for the first time widely expected. Demand for safe assets will re-emerge on concerns over the health of the euro-zone and U.S. economies, they predict, while threats to major currencies like the dollar and the euro, from potential new quantitative-easing measures and the euro-zone debt crisis, will also push investors toward gold.
The prospect of another year of low or negative real interest rates in developed countries, particularly the U.S., should be a draw for new money in gold, as has been the case this year. Low rates reduce the opportunity cost of holding gold, an asset that provides no yield.
A number of factors should also support silver in 2012.
"Investors [are expected to] raise their exposure to silver due to increased usage in new applications, higher offtake from emerging markets and continued concerns over the stability of the global macro economy," said Bank of America Merrill Lynch metals analyst Michael Widmer.
Even with gold's recent difficulties, it has performed better than some other commodities this year. Gold's 12% rise compares with a 9.4% rise in Brent crude-oil futures and a 26% decline in Comex copper
Morgan Stanley analyst Hussein Allidina is now forecasting an average of $2,200 a troy ounce for gold next year, up from an estimated average of $1,612 this year and from Monday's settle at $1,594.40 an ounce on Comex.
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