Gold and Silver Investments have partaken in the Bloomberg Precious Metals Survey (see table of forecasts below) and the Reuters Precious Metals Poll. We would prefer not to get into the forecasting and predictions business as predictions and forecasts are fraught with uncertainty at the best of times and this is particularly the case in 2009 given the massive macroeconomic and geopolitical uncertainty and risk. As many have found to their cost in recent years it is nigh impossible to predict the future movement of any commodity, currency, equity indices, property market or any other asset class (particularly in the short term) as there are so many variables. Having said that, in terms of accuracy we have been far more accurate than most other commodity brokers, bullion dealers and banks in recent years as we have called these markets right on a consistent basis and hopefully we can predict lines of probability.

Massive volatility and unpredictability in all markets is why we advise avoiding leverage as leveraged players will likely again have a very torrid time in 2009.

Gold and Silver Investments are the fourth most bullish on gold but the most bullish on silver. We believe our estimates to be conservative as the average price of gold in 2008 was some $872/oz and thus an average price of some $1,020 is only some 20% above the 2008 average price. Similarly a high of $1,250 is only 21% above the 2008 high.

There is a potential that prices rise far above these levels, particularly as the (Commodity Futures Trading Commission) CFTC is now investigating the massive concentrated short positions in the COMEX gold and silver markets – if these short positions get squeezed and some of the bullion banks are forced to buy back their huge short positions, prices could rise to levels that will surprise even the bulls.

The survey is very interesting as it shows that there is a wide disparity between the forecasts of the many participants and between the bulls and the bears. There are more bulls than bears with only 7 of the 20 participants calling for a lower average price in 2009.

Most bearish are the online trading platform Finotec, bullion dealer Kitco and the bullion banks JP Morgan and Barclays. They all forecast an average price of between 6.3% and 11.8% below the average price of $872/oz in 2008. Many of the bears have been bearish for a number of years and have failed to realize that we are in a bull market. Given the deflationary headwinds assailing us early in 2009, they may be proved right this year as further massive deleveraging could affect the gold price.

However, we believe this to be unlikely given the massive macroeconomic and systemic risk and increasing monetary and geopolitical risk. And we believe that should the deflationary pressures continue throughout 2009 than most commodities and asset classes will again fall sharply in 2009 but gold will again outperform. As gold did in 2008 when it was up 6% in USD terms and by far more in most other currencies. Importantly, gold also rose during the last bout of sharp deflation in the Great Depression of the 1930's when Roosevelt revalued gold by 60% and devalued the dollar by 60%, from $22/oz to $35/oz.

Also there is the significant risk that deflation will gradually give way to virulent stagflation (especially in the US) if the dollar resumes its bear market and begins to fall sharply again.

All in all it promises to be a very uncertain and likely volatile year and it will be interesting to see how gold and silver actually perform.

More details of the Bloomberg Precious Metals Survey, can be read at 'Gold May Advance for Eighth Year as 'Perfect Insurance' Sought' - http://www.bloomberg.com/apps/news?pid=20601103&sid=a1C1lhTmTaFo&refer=us