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In its first-quarter Metals Review, the commodity brokers and researchers noted that the rise in prices had already affected physical demand and encouraged higher supplies of material returning to the market in the form of scrap.

Purchases from miners will no longer be a feature of the market as all the large gold mining companies have bought back their forward hedge books.

In 2010, the market was supported by a sharp increase in demand from both Chinese and Indian buyers. But, with central banks in both of these countries tightening monetary policy in an attempt to counter inflationary pressures, demand for gold and silver from these regions may slow in 2011, it predicted.

"Inevitably, this places greater pressure on the investment sector to support the price. But if European investors are encouraged by measures their governments are taking to restore fiscal sustainability, and US investors are gradually returning to equity and debt markets, it is not immediately clear where this demand will come from," Natixis said.

Asian central banks have been increasingly important buyers of gold, but both China and Russia source most of their gold reserves from local mines. As a result of these arguments, Natixis forecasts average gold prices of $1,225/oz and $1,000/oz in 2011 and 2012 respectively.

"If gold prices decline as we expect, silver prices are likely to drop back sharply from the spike experienced during the fourth quarter of 2010," it continued.

Silver prices are already at historic highs relative to gold prices, with little fundamental justification for this recent outperformance given the healthy increases in silver supply in recent years. For the next two years, Natixis's base case scenario envisages silver prices falling back to US$24/oz and US$18/oz in 2011 and 2012.

 "Despite our somewhat bearish view of the precious metals complex, we expect the recent outperformance of palladium and platinum, relative to the other precious metals, to continue. Thanks to rising demand from the global automobile industry, these metals are behaving increasingly like industrial rather than precious metals, and with expectations for a further expansion in global automobile sales in the years ahead, we remain positive on these two metals," it added.

In its analysis of the gold market, Natixis noted that, in 2009 and 2010, investment activity took all the headlines as it pushed the price higher. Now that this powerful force appeared to have retreated, the market fundamentals had been reasserting themselves.

"For gold, we expect a significant retreat from recent highs. The fundamentals for the platinum group metals (PGMs) are more solid than for the other precious metals. However, given the strong price performance we could see profit-taking emerge.  Nevertheless, the PGMs should continue to outperform both gold and silver."

Natixis Commodity Markets is forecasting an average price for platinum of $1,750/oz in 2011 followed by $1,800/oz in 2012, with palladium at $800/oz and $875/oz respectively. Although these annual averages were below prices prevailing in early February, they were substantially up on 2010 levels, it concluded.