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Heraeus Precious Appraisal

  • Edition 33 - 23 September 2019

Precious metals outshine industrials

Weakening global trade and economic growth, as well as distinct political risks, could boost precious metal prices. The impacts of these issues were central to discussions among attendees at New York Platinum Week.

Gold, silver and platinum are the winners. The general view was that global growth is slowing and the political outlook in the US and elsewhere is not necessarily conducive to improving the situation, so safe haven buying would continue to lift the gold price. Silver should benefit as a cheaper alternative to gold. The gold:silver ratio has narrowed to 84, but is still well above its long-term average of 63. Platinum’s low price could also see it perform well, as its discount to gold remains around $560/oz. The price has broken out of its trading range, possibly owing to concerns about a strike in South Africa if arbitration over wage negotiations fails. The fundamental picture looks weak, but ETFs have absorbed the excess stock. ETF investors that bought earlier this year have made a positive return.

However, the high palladium and rhodium prices are exposed if the economic outlook deteriorates. Current forecasts for auto sales suggest palladium and rhodium demand will keep growing and support the high prices, but concerns about a recession are rising in the US and Europe.

The Fed has cut rates again citing “the implications of global developments for the economic outlook”. Furthermore, in the US, the presidential election next year will increasingly become the focus. Whether that is a positive or not could depend on whether President Trump thinks his re-election chances are better if he closes a trade deal or continues to talk tough and raise tariffs. China-US trade talks appear to be moving forward, but could easily break down again. The US is also engaged in trade talks with the EU. Brexit – the UK’s attempt to leave the EU – still has an uncertain outcome and if the UK were to leave without an agreement in place then trade would suffer.

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Heraeus Precious Metals - Setting the PGM agenda for the years ahead

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