LONDON, Jan 26 (Reuters) - Gold prices are expected to hold firm this year as investors, looking for safety away from the mayhem in financial markets, pile into the precious metal used as a store of value, a Reuters survey showed.
But the survey also showed prices of industrial precious metals platinum, palladium and silver are expected to drop further as recession and tumbling consumer and corporate confidence hits demand.
The survey of 56 precious metals analysts and traders was carried out over the last three weeks. It showed gold prices would average $862.50 an ounce this year — only about $10 below the 2008 average price of $871.21 an ounce.
Gold usually trades in the opposite direction to the dollar, and was expected to come under pressure from a recovery in the U.S. currency. However, it is showing signs of decoupling from the dollar and was bid at $903.20 an ounce at 1030 GMT on Monday XAU=.
“Widespread financial turmoil is the number one factor for gold,” said Calyon analyst Robin Bhar. “It seems both the dollar and gold could be beneficiaries of the flight to quality.”
“Whereas in the past, when people went into the dollar it was negative for gold, it (now) seems they can go up together, because people are looking for something that is a safe store of value.”
Gold is expected to climb through 2009, with prices seen at a median $880 an ounce in the fourth quarter compared to $825 an ounce in the first three months of the year. The average forecast for 2010 also stands at $862.50 an ounce.
Industrial precious metals prices will behave differently this year, reliant as they are on real economy demand. Silver is used in electronics, while platinum and palladium are used to make autocatalytic converters to clean car emissions.
Median forecasts for platinum are for a price of $963 an ounce in 2009 — 38 percent below last year’s average of $1,565.67 — while for palladium they show a median $209.50, 40 percent below the 2008 average of $347.21.
Spot platinum XPT= was bid at $962 an ounce and palladium XPD= at $191 an ounce at 1030 GMT.
Both platinum and palladium have tumbled from the highs they reached last March on the back of a power shortage in South Africa, source of four out of five ounces of the world’s platinum.
Platinum hit a record high of $2,290 an ounce in March, but dropped to a five-year low of $732.50 in October after a spate of bad news from the automobile industry, which accounts for about half of platinum consumption.
Analysts say demand fears are likely to continue to weigh on platinum prices.
“Further contractions in global economic growth during 2009 will ensure that we do not see any record platinum group metals prices for some time,” said Mitsui Global Precious Metals analyst Edel Tully.
“But given the long wave of declining price action in the second half of 2008, we forecast their downside is perhaps limited, close to the trading floor that was set last year.”
Prices are expected to recover slightly in 2010, with the median forecast for platinum rising to $1,100 an ounce and the price view for palladium climbing to $250.
Investment in production is likely to ease off in a low-price environment, leading to tighter supply next year.
Silver fares slightly better, with a median forecast for this year of $11.50, 23 percent off the 2008 average of $14.94.
The metal has also benefited from safe-haven flows, analysts say, and is often bought as a cheaper alternative to gold.
As with gold, prices are expected to rise throughout the year, with the median forecast rising from $10.75 in the first quarter to $12.95 in the last three months of the year.
In 2010, silver prices are expected to move higher, with the median forecast shifting up to $13 an ounce.
Spot silver XAG= was bid at $11.98 an ounce.
For details of survey results click on COMMODITYPOLL01 For a story on silver double click on [ID:nLN318255] For a summary of analysts comments click on [ID:nLL9745]
Additional reporting by Michael Taylor, Pratima Desai, Frank Tang, Carole Vaporean, Alden Bentley, Chris Kelly, Nick Trevethan, Lewa Pardomuan, Ruchira Singh, Chikako Mogi, Bruce Hextall, Polly Yam, Jonathan Leff, Alfred Cang; editing by Anthony Barker