CT: Silver to outperform gold in 2011, says François Mouté
French investment star François Mouté believes silver will outperform gold in 2011 as long as there is no change to interest rates in the coming months.
‘It is clear that silver is far more volatile than gold and if we assume precious metals will outperform next year then gold will go up, and silver even more,’ said the Citywire A-rated Mouté, a renowned gold bull who expects gold to reach as high as €1800 per ounce in 2011
Both precious metals’ growth patterns are inherently linked and when gold is booming silver usually follows. The Paris-based manager, who runs the Neuflize US Opportunities and BNP Paribas L1 Opportunities USA funds, said that if interest rates were to rise, this would affect the gold price and would in turn influence silver.
‘Whenever we have negative interest rates, as we have now, gold is in a bull market. The only thing that could stop it is much higher short term interest rates,’ said Mouté, adding that he uses them as his main warning signal for a rise or fall in precious metal prices.
His views on silver’s outperformance next year are shared by a report published by BMO Capital Markets - investment subsidiary of the Bank of Montreal, which featured in Citywire's interview last week with Carmignac’s commodity manager David Field.
The report said that although silver initially appears to be fully priced in relation to gold ‘the fundamental structure of silver should allow the gold-silver ratio to head even lower, allowing silver to outperform next year.’
Investment giant JP Morgan has also been in the silver market spotlight this week following news it had reduced a large position in the US silver futures market. It had come under scrutiny about its impact on global prices for the precious metal, according to the Financial Times.
Mouté said although the firm’s holdings in silver were ‘exaggerated’ it was only ‘one of the participants’ and many others are stockpiling commodities.
Despite the positive outlook for the precious metal market, the French manager does expect fluctuations in gold and silver price. ‘We have reached very high levels for both gold and silver and we should not be surprised if we see short term adjustments.’
