ScotiaMocatta on gold and silver

ScotiaMocatta, the Canadian bullion bankers, has issued its latest monthly analysis in which it concludes that investors’ confidence in gold has been unnerved by an erratic performance.

According to Scotia, gold’s performance has not been good so far this year, given that prices have only risen 4%.

However, the bank concludes that with a seasonally strong period ahead and forecasts of a further decline in the US dollar, investor confidence will return.

The bank sees gold as a hedge across the growing uncertainty in the financial markets and continued weakness in the US dollar.

Demand will also be affected by up and coming religious festivals and the wedding season, which starts in September and runs through to Christmas.

In the case of silver, the report expresses concerns that the bouts of liquidation selling in gold have triggered selling in silver too.

The volatility in silver prices so far this year has begun to unnerve investors’ interest.

In addition, the bank forecasts that mine output of silver will increase 3% during 2007 but demand likely to increase by less than 1%.

According to Scotia’s analysis, 2007 will produce a silver surplus of 1,600 tonnes and investor interest will have to remain strong to absorb this level of surplus.