More price volatility is ahead
The US economy appears to be slowing more than the Eurozone and the Federal Reserve has more room to ease monetary policy. Although the Fed claims there will be no change to interest rates this year, the market is expecting at least one cut owing to the weak economic situation. This would likely see the dollar weaken relative to the euro.
Gold and silver prices have been boosted early in the year by safe-haven buying spurred by the US assassination of an Iranian general. Knee-jerk reactions to geopolitical events tend to be short-lived so this rally could quickly fade. However, Middle East tensions, the US presidential election and trade talks could all be incentives for safe-haven asset demand this year, so the backdrop remains favourable for gold and silver price appreciation.
Platinum is the weakest among the PGMs. The significant price discount to gold and palladium has helped to drag the platinum price up, but with poor fundamentals and a huge oversupply anticipated (excluding investment) for a second year there is unlikely to be much further upside.
Palladium and rhodium have started 2020 where 2019 left off, by rallying hard. Price volatility looks set to remain a feature this year. Lease rates only started to pick up in January after prices had already rallied strongly so there was sufficient liquidity. For now the markets are tightening and end-users are paying ever higher prices for the metals. The prices of both metals are tightly bound to the fortunes of the automotive industry and prices this high could reverse rapidly if the economic situation does not improve and auto sales continue to slide. Some disruption to supply from South Africa is possible which would have a larger relative impact on production of the small PGMs than on platinum or palladium.