Gold

Q: Gold in 2010 reached a 10 year high at over $1400. What do things look like moving forward?

According to the World Gold Council,the main trends for gold in 2010 were:

- Jewelry was very strong, led by Chinese and Indian consumption. Annual jewelry demand rose by 17% in 2010.

- Investment demand remained stable in 2010,

- Central banks shifted from net sellers to net buyers in 2010, the first time in 21 years.

- As demand for technology increased in 2010, so did the demand for gold in electronics, increasing 41% to $17 billion.

- Total supply increased about 2% from 2009 due to a number of new projects.

- Scrap supply fell slightly compared to 2009 by 1%

We find it particulary interesting that both Indian and Chinese investment and jewellery demand continue to grow. This is extremely bullish in Scotia's view.

Another indicator is the gold/silver price ration. Today the gold/ silver ratio Is reaching new lows at about 42.7. This is propelling silver equities higher. Can silver keep this pace up? Will the ratio dip below 40 and if it does will it then correct where gold makes it's move or is this a new base level for the gold-silver relationship? All are difficult questions to answer, but we would think that prudent profit taking on spikes and buying on dips is the only way to play this trend.