Forecasts for gold, silver, copper for 2011

Average gold and silver prices will rise in 2011 as investors continue to turn to precious metals as a hedge, while copper may rise in the New Year but be volatile, particularly with a new physically backed copper exchange-traded product, said a monthly metals report Wednesday from the consultancy VM Metals and ABN AMRO, a Netherlands-based bank.

As problems with the U.S. economy and European debt issues linger, investors have continued to invest in gold, the report said.

“Since mid-November ETF inflows have risen by 1% to 64.9 Moz (million ounces), just short of its record high of 65.1 Moz,” the report said. “The U.S. ETFs led the advance, increasing by 7% over the same period….”

Gold has been heavily influenced by the U.S. Federal Reserve, as prices have increased 60% since the Fed announced its “money printing” campaign on March 18, 2009, the report said. As long as the Federal Reserve continues to stimulate the economy, gold will continue to rise on investment demand, analysts said.

The monthly ABN AMRO/ VM Group report raised its previous average 2011 gold forecast by $35 to $1,459, up from $1,424 in November. The 2010 average was listed at $1,225.

Silver has been benefitting from strong investment demand via both bullion and ETFs this year.

“In the month of November, 4.2 (million) silver eagles were purchased by U.S. Mint dealers, topping the previous record of 3.69 (million) set in December 1986,” the report said. “ETF inflows have also risen sharply in November, with global holdings growing by 5% to a record high of 477 Moz.”

Industrial activity in China has also helped drive the price of silver, with an increase of silver imports into China, the report said.

The analysts raised their average 2011 silver price forecast by nearly $2 to $29.63, up from $27.66 in November. The 2010 average was listed at $20.13.

A new physically backed copper exchange-traded product was introduced Friday and will almost certainly help drive copper prices higher, the report said, but suggesting that copper prices will be volatile throughout the year.

“Even tepid investor interest in the new copper ETP will see prices reach more than $10,000 (per metric ton) in 2011,” VM Group and ABN AMRO said. “But the journey will be volatile if the copper-backed ETPs attract short-term bets.”

China will also be affected by the new ETPs, the report said. The country’s imports rose for the time in three months during November, by 29%. However, worries remain with Chinese inflation and money supply, the report said.

The average 2011 three-months copper price forecasts was raised by $210 to $8,833 per metric ton, up from $8,623 in November. The 2010 average is $7,537.