Gold prices have been volatile in recent weeks, but ultimately receded from the level at the start of April due to a strengthening of the U.S. dollar. On 11 May, gold closed the trading day at USD 1,321 per troy ounce, which was down 2.8% from the same day in April. Overall, gold prices have been volatile this year and now lie close to the value at the end of 2017; May’s price was 1.4% higher on a year-to-date basis. The fi gure, however, was up 7.9% from the same day last year.
A resurgent U.S. dollar is chiefl y behind the recent weakness in gold prices. The dollar has risen notably in past weeks thanks to the prospect of higher interest rates in the U.S. and higher yields on U.S. assets. A stronger dollar puts downward pressure on gold prices, as it makes gold more expensive for holders of other currencies and thereby reduces the demand.
Outside of the dollar and rising global interest rates, some factors are supporting higher gold prices. In particular, global geopolitical uncertainty remains high, with prospects of a global trade war and tensions in the Middle East fueling safe haven demand for the metal.
FocusEconomics panelists see gold prices hovering slightly above the current level in the coming quarters. Global uncertainty and volatile fi nancial markets should continue to
support safe haven demand for the metal, while rising interest rates in the U.S. should not be too large a headwind for prices, as they are likely already priced in. Our analysts project gold
prices will average USD 1,314 per troy ounce in Q4 2018 and USD 1,353 per troy ounce in Q4 2019.
This month, the bulk of our analysts made no changes to their forecasts, with 24 leaving their projections stable. However, 3 panelists raised their forecasts, while only 1 forecast was cut.
A wide variation exists between our panelists’ forecasts, refl ecting the uncertain global backdrop. The maximum forecast is for gold to average USD 1,460 per troy ounce in Q4 2018, while at the opposite end of the spectrum, the minimum forecast for the same period is USD 1,100 per troy ounce.
Silver prices were broadly unchanged over the last month and continued lingering at the bottom end of a four-month trading range. On 11 May, silver closed the trading day at USD 16.8
per troy ounce, which was down 0.3% from the same day in April. While the price was down 1.5% on a year-to-date basis, it was 3.3% higher than on the same day in 2017.
Strong industrial demand for silver has kept prices on a steady course. Demand has been fueled by expansions in the photovoltaic and semi-conductor markets, including an upturn in silver off take in electrical and electronics applications. The use of silver in solar photovoltaic panels has
continued to grow rapidly and at a pace that exceeded even optimistic projections. Moreover, solid performances in the manufacturing sectors of key global economies have helped
power demand for silver in industrial uses. Falling supply from mines, along with declining global silver scrap supply, is expected to tighten the market and exert upward pressure
on prices this year. Increasing fabrication demand, along with higher jewelry and silverware demand, should also lead to higher prices for silver. Safe-haven demand from investors for the precious metal could also pick up amid a volatile geopolitical backdrop, providing a further boost to prices.
Higher demand for industrial applications and lower supply of silver should lead to an upturn in prices for the precious metal this year. Downward price pressures stem from a potential
strengthening of the dollar, which would reduce safe-haven infl ows into silver and dampen prices. FocusEconomics Consensus Forecast panelists expect prices to climbmoderately this year, averaging USD 17.2 per troy ounce in Q4 2018. The panel sees silver prices rising further in 2019,
to an average of USD 18.1 per troy ounce in Q4. The majority of our panelists held their forecasts for Q4 2018 steady from last month: 17 analysts made no changes to their projections. In contrast, 2 panelists lifted their projections, and 2 revised down their forecasts. There was a divergence in panelists’ views: The maximum price forecast for Q4 2018 was USD 19.2 per troy ounce, while the minimum projected price was USD 15.3 per troy ounce.
After hitting an over eight-month low in April, palladium prices regained some lost ground in recent weeks. On 11 May, palladium closed the day at USD 1,004 per troy ounce, which was 4.8% higher than on the same day in April. In addition, May’s price was 24.9% higher than on the corresponding day in 2017. However, the price was still below December’s multi- year highs and was down 4.9% on a year-to-date basis.
The volatility seen in palladium prices recently has been largely due to geopolitical events. Fears that the U.S. could put additional sanctions on Russia, the world’s largest supplier of palladium, caused prices to rise sharply in mid-April over fears that palladium trade could be disrupted. However, a recent softening of the U.S.’s tone towards sanctions on Russia have caused prices to recede somewhat since the sharp bounce- back. In addition, the prospects of a trade war between China
and the U.S., two of the major consumers of automobiles, and hence palladium, have rattled prices. Outside of geopolitical events, supply concerns should support palladium prices as the market remains in a supply defi cit, a situation expected to continue this year.
Strong demand for automobiles thanks to a healthy global economy should support palladium prices this year and next. On the supply side, ongoing tensions between Russia and the
West should continue to fuel supply concerns, adding upward pressure on prices. FocusEconomics Consensus Forecast analysts polled this month project that prices will rise from the
current level and average USD 1,043 per troy ounce in Q4 2018. Next year, they see prices rising slightly and averaging USD 1,050 per troy ounce in Q4. The bulk of our panelists left their projections unchanged this month, with 13 making no change to their forecasts. However, 2 analysts downgraded their projections. Meanwhile, no panelists raised their forecasts.
Most panelists see prices averaging above USD 1,000 per troy ounce in the fourth quarter; however, diverging views persist. The minimum forecast is USD 880 per troy ounce for Q4 2018, while the maximum price forecast is USD 1,210 per troy ounce.
Platinum prices remained depressed at the start of May. On 11 May, platinum traded at USD 926 per troy ounce, among the lowest prices since the beginning of the year. The print was down 0.8% from the same day last month, but was 0.1% lower on a year-to-date basis. Moreover, the price was up
1.6% from the same day in 2017. Prices for the precious metal have been kept subdued by supply
outweighing demand . Platinum supply has been constrained by the closures of unprofi table mines in South Africa owing to a lack of investment, which ramped up maintenance costs.
That said, recent reports indicate that South African platinum miners are now beginning to increase supply despite weak prices. This will further suppress platinum prices. Looking at the demand side, the shift away from diesel-run vehicles to electric-powered alternatives to limit pollution levels has
struck the platinum industry hard; platinum is used in the catalytic converters of diesel-powered cars.
That said, platinum prices are expected to climb this year thanks to an ongoing shift away from palladium due to more favorable prices for platinum. While some South African mines
are expected to boost supply somewhat, supply will continue to remain restrained as others such as Impala Platinum—the world’s second-largest platinum producer—has indicated
that it will be closing four mines over the next four years. The drive to low and zero emissions will further curtail the use of platinum, however, and exert downward price pressures.
FocusEconomics panelists expect prices to average USD 988 USD per troy ounce in Q4 2018. Prices are expected to continue to rise and average USD 1,083 per troy ounce in Q4 2019.
The majority of our panelists left their projections for Q4 2018 stable this month, with 13 panelists making no changes. On the other hand, 3 cut their forecasts, and no panelists revised
their projections upward. There was, however, still divergence in panelists’ views, with
a minimum forecast of USD 900 per troy ounce in Q4 2018 and a maximum forecast of USD 1,100 per troy ounce.
Por Focus Economics -https://www.focus-economics.com/ - Barcelona- España
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