Gold, the best-performing metal in 2008, may appreciate for an eighth year as investors seek a refuge from declining interest rates at the same time that central banks inject more cash into the banking system. The metal will average $910 an ounce in 2009, 4.3 percent more than last year, according to the median forecast of 20 analysts, traders and investors surveyed by Bloomberg. Silver and platinum, which averaged at least 12 percent more in 2008, will decline this year, the survey showed. Gold prices may strengthen after about $29 trillion was wiped off equities last year, the Federal Reserve cut interest rates to as low as zero and governments sought to end the worst financial crisis since World War II. The metal was one of only four commodities to rise when the Reuters/Jefferies CRB Index fell 36 percent, the worst year in a half-century. “People fear inflation, they fear the credit crunch and they fear currency losses, and gold is the perfect insurance against all of that,” said Frederic Panizzutti, a senior vice president at Geneva-based bullion refiner MKS Finance SA, who forecasts gold will average more than $900 in the first half of 2009. Panizzutti was the most accurate forecaster in the London Bullion Market Association’s 2008 survey. Average gold prices have risen for seven consecutive years, the longest winning streak since at least 1949. While the return of 5.8 percent through 2008 was the smallest since 2004 in dollar terms, gold rose 11 percent in euros and 44 percent in British pounds, data on Bloomberg show. Mali Mines The plunge in equities spurred some investors to buy precious metals. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, reached 780.23 metric tons on Dec. 29, up from 627.88 tons at the start of the year. The total is equal to almost four months of supply from mines. Gold producers were among the top performers in the 162- member Bloomberg World Mining Index last year, which fell 61 percent. Royal Gold Inc., the Denver-based owner of rights to gold sales from companies including Barrick Gold Corp., rose 61 percent. Randgold Resources Ltd., the Jersey, Channel Islands- based owner of two gold mines in Mali, advanced 60 percent. “There is every reason to believe gold’s going higher and a lot sooner than most people think,” said Randgold Chief Executive Officer Mark Bristow, head of last year’s best performing company in the FTSE 100 index, which it joined last month. “Our estimate is that new gold supply is going to be reduced by 15 percent over the next three years.” Flood of Cash Governments across Europe are selling more debt to fund bank bailouts and revive economies mired in their worst slump since the Great Depression. The U.S. Treasury Department estimated it will auction as much as $2 trillion of debt this fiscal year, which began Oct. 1. Euro-region nations will borrow as much as 880 billion euros ($1.2 trillion) this year, according to Royal Bank of Scotland Group Plc. The flood of cash may undermine confidence in currencies, spurring investors to buy gold, said Mario Innecco, a futures broker at MF Global Ltd. in London. Innecco correctly predicted two months ago that gold would trade at $850 to $950 by the end of December. “People will flee away from paper currencies because central banks are throwing everything at the market to try to revive things,” Innecco said. “People will flee to gold.” The incoming administration of President-elect Barack Obama will seek as much as $850 billion in new spending and programs, congressional officials have said. China unveiled a 4 trillion- yuan ($585 billion) economic stimulus plan in November and European Union leaders are drawing up packages worth about a combined 200 billion euros. ‘A Trade War’ “It’s to some extent a trade war,” said Marc Faber, publisher of the Gloom, Boom & Doom Report. “You cheapen your currency so you export problems to somebody else, but since the whole world is engaged in trying to lower the value of their currencies, it may very well happen that all currencies lose value against the hot currencies like precious metals.” Michael Jansen, an analyst at JPMorgan Securities Ltd. in London, said gold should average $800 this year. A “deep” recession will likely mean “a clear lack of demand from jewelers,” and fewer mining companies are seeking to buy gold to cancel forward sales, he said in a Dec. 11 report. The so-called global producer hedge book stood at 585 tons at the end of June, the lowest since 1987, according to London- based consultant GFMS Ltd. Miners can agree to sell future production at current prices to protect against losses caused by sudden declines, a strategy known as hedging. The risk of deflation is higher than that for inflation, particularly in the first half, Jansen said in his report. Some investors buy gold as a hedge against rising prices. Inflation Outlook U.S. inflation will drop to 1.1 percent in the first quarter, compared with 1.95 percent in the preceding three months, according to a Bloomberg survey of economists. Prices will drop 0.45 percent in the third quarter, the survey shows. “Gold will go to a new record in 2009,” said Philip Klapwijk, chairman of GFMS and the second-most accurate forecaster in the LBMA survey. “There really is scope for a major collapse in confidence in the U.S. dollar. In 2010, we could see 10 percent inflation in the U.S.” Silver, platinum and palladium are all likely to average less this year, Bloomberg’s survey showed. The metals, more reliant than gold on industrial demand, tumbled last year as economies weakened. Silver will average $12 an ounce, compared with $15 in 2008. The metal, used in applications such as photographic paper, fell 23 percent through last year. Palladium Demand Platinum, mostly used in jewelry and autocatalysts, will probably average $975 an ounce this year, compared with $1,574 last year. The metal slumped 59 percent from a record $2,301.50 set in March. Palladium, also used to remove noxious fumes from exhausts, will average $220 an ounce, down from $350.90 last year. European car sales plunged 26 percent in November, the biggest monthly drop since 1999, while sales in the U.S. fell 37 percent to the slowest annual pace in 26 years. Automakers account for about half of global platinum and palladium consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account. The following is a table of gold, silver, platinum and palladium forecasts. The table shows estimates in dollars per troy ounce.

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