Heraeus Precious Metals Forecast 2020

Hanau, January 28, 2020

  • Mini interest rates and geopolitical uncertainties support gold price
  • Silver still in the shadow of gold
  • Palladium bottleneck remains
  • Platinum in surplus on the market
  • Rhodium still in demand
Statement of Hans-Günter Ritter

Most precious metal prices will continue to rise in the new year, according to Heraeus Precious Metals, the world's largest precious metals provider. "Global developments will again have a strong influence on precious metal prices in 2020. While gold tends to be influenced more by uncertainties, platinum group metals are affected by the globally more stringent limits in the automotive industry," said André Christl, President of Heraeus Precious Metals.

Continued low interest rates, tensions in the Middle East, and unresolved trade conflicts should keep investor interest in gold high in 2020. The massive purchases by central banks should also support the price of gold. According to the Heraeus experts, silver will profit from strong industrial demand, for example in photovoltaics. In the case of palladium, the supply deficit, triggered by strong demand from the automotive industry, should drive prices under strong fluctuations. Platinum should not make large leaps in view of the continuing oversupply.

Overview of trading ranges:

Edelmetall Bandbreite
Gold 1400 – 1700 Dollar/oz
Silver 16,25 – 21,00 Dollar/oz
Platinum 800 – 1050 Dollar/oz
Palladium 1800 – 2800 Dollar/oz
Rhodium 5000 – 12.000 Dollar/oz
Ruthenium 200 – 300 Dollar/oz
Iridium 1450 – 1600 Dollar/oz

Investors continue to flee into gold as a safe haven

Although much of the political and economic uncertainty has already been priced in following the recent rise, the triggering factors driving the gold price remain. These include extremely low interest rates and falling bond yields, trade disputes between China, the EU and the US, but also the US presidential election due this autumn. "In addition, the central banks remain on the buyer side, and demand also remains high from the investment side," said Hans-Günter Ritter, Head of Precious Metals Trading at Heraeus. A possibly weakening dollar and uncertainty about the effects of the brexit speak for continued strong interest in gold.

However, the high price and meagre economic growth, especially in the important markets of China and India, should lead to a certain reluctance to buy jewelry. Heraeus experts expect a range of between USD 1400 and 1700 per ounce of gold in 2020.

Silver profits from industrial demand

Just like gold, silver will benefit from the fact that in these uncertain times, investors are looking to the two precious metals as a safe haven. In addition, better industrial demand, especially from photovoltaics and the development of the fast internet standard 5G, should support the price of silver. However, investor demand is unlikely to be as strong, so that silver will continue to lag behind gold in terms of performance. For silver, Heraeus is assuming a range between $16.25 and $21.00 per ounce.

Platinum oversupply remains

Heraeus expects a market surplus for platinum, which is mainly used in diesel exhaust catalysts, even if the supply from mines should shrink by one percent. Platinum is suffering from the weakness of the automobile and jewelry industries, which together account for about 70 percent of demand. Both industries are likely to face problems in 2020. In contrast, a slight increase in demand for use in oil refineries and higher demand for platinum as a catalyst material for chemical processes will be a ray of hope.

Investors have rediscovered the precious metal, which has been in poor shape recently, due to its low price, and with a firmer gold price this trend should continue. Experts do not expect the industry to replace the comparatively cheap platinum with palladium, which has recently risen sharply, in the medium term. Heraeus sees a price range of $800 to $1050 per ounce for platinum.

Palladium price likely to fluctuate strongly in 2020 as well

The structural shortage of palladium will continue to exist in 2020. The Heraeus experts expect a market deficit of about 18 tons. Palladium demand comes primarily from the automotive industry, which is the strongest customer with 81 percent - the metal is used in exhaust catalysts for gasoline engines. Even if vehicle sales will decline, the higher catalyst loading in gasoline engines should more than compensate for the expected decline. The stricter exhaust emission standards in China and India, which are set to become stricter in the future, indicate a higher demand for palladium. In addition, renewed power outages in the important producing country South Africa could paralyze production and reduce supply, which in turn argues for higher prices.

One risk with palladium, however, is its strong dependence on the weal and woe of the automobile industry. Even weakening trade between the economic giants USA and China could fundamentally change the price development. According to Heraeus, the range for the fine ounce of palladium is $ 1800 to $ 2800 per ounce.

Rhodium should continue to rise with fluctuations

An end to the upswing is not in sight, but Heraeus experts expect strong fluctuations. Demand from the automotive industry, by far the largest customer, is likely to remain at a high level in many regions due to new, more restrictive emission standards - this is likely to lead to another market deficit. The price of rhodium could receive an additional boost if the mining companies in South Africa, where 80 percent of production is being cut, have to cut back their production again. The country is in a severe supply crisis, with power cuts occurring there time and again. The trading range this year is between 5,000 and 12,000 dollars per ounce.