With the uncertainty over the outcome, the US Presidential election has many investors on the sidelines . Gold will be supported by and likely see gains into year end due to the coming uncertainty surrounding the US “fiscal cliff.” For more details read: “Fiscal Cliff gets into Focus…” Tax increases and spending cuts are expected which would sink the US economy into a deep recession or a Depression. If US Congress cannot agree on a deal by the end of the year it could have deleterious effects on the dollar and on capital markets. Stormy volatility may be seen soon after the election when the reality of the appalling US fiscal and monetary situation is realized. China could become more aggressive in stimulating its economy with the new government in place at the end of the first quarter. Given the extremely bullish fundamentals for Inflation triggered due to ultra loose monetary policies, negative fiscal outlooks, negative real interest rates and global currency debasement, we expect this November and year end to be very positive for Gold and particularly the still highly undervalued Silver. The rational & prudent investors should ideally use the current dips in Gold and Silver Prices to enter fresh buy positions as both may soon rise with extreme volatility, especially Silver. Investment demand should support silver, as it benefits from higher Gold Prices, and may benefit the most from loose monetary policy and a rebound in risk appetite. The rally in Silver will extend higher even after the Gold rally weakens. A Rally in Base Metals & Silver is what seems the most likely outcome of the ultra lose monetary policy adopted by several central banks. With Gold already not far below its lifetime peak, the best alternate avenues are Silver & then the Base Metals complex with Copper riding the sector. Price out-performance more likely to come from those supply-constrained metals such as Copper & Lead. Accommodative monetary policy should provide support but the upside is limited by subdued demand in a sub-par economy. Weaker consumer demand will later hurt the industrial use of silver, while high prices then will reduce its demand as a jewelry material. Silver & Gold would then see sharp declines, though there is a long time to go for that to occur.
