Deal or No Deal !

Wednesday December 19, 2012 13:08

Maybe Howie Mandel should be the moderator. There is a lot of noise in this market and the additional uncertainty over the fiscal cliff has prompted more tax selling than normal towards year-end as investors anticipate higher capital gains taxes in 2013. Some of the more well known forecasters are calling the end to the bull market in metals.

Continued massive monetary expansion by the EU, U.S., Japan and China will continue in 2013.
Cost of capital to remain under 2% for the foreseeable future.
Elections are over, Iran continues its enrichment, how long will the Israelis wait?
Technically, the up-trends are all intact.
Retail clients are net sellers. Usually a contrarian indicator.

There are downside risks to the metals.

Fed tightening early, but not likely in 2013.
Global recession. More likely to continue with muted growth, in the US, but a recession in Europe in the 1st quarter is possible.
Physical demand and ETF holdings fall sharply. Metals have been trading as a risk on asset and suggestions continue to see higher equity valuations in 2013. The link may be broken in 2013.

When weighing the above, an allocation of metals in your portfolio continues to make sense.

By Peter Hug
Global Trading Director
Kitco Metals Inc.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Deal or No Deal !

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