Precious Metals Weekly
Group Economics Macro & Financial Markets Research
Downside risk is increasing
Georgette Boele, tel,+31 20 6297789
1 May 2015 • • • •
Gold prices barely profit from dollar weakness, but fall back when the dollar recovers Other precious metal prices show a similar pattern… …and this signals that price weakness has further to run We remain negative on precious metal prices
Gold prices barely profit from dollar weakness…
across the board and 10y US Treasury yields rose. As a result,
This week, there have been rather surprising market
gold prices quickly fell to USD 1,180 per ounce. The higher-
movements in gold prices. At the start of the week, gold prices
than-expected Chicago PMI also weighed on gold prices.
moved to above USD 1,200 per ounce because of hopes that the Fed would be more dovish than expected. The weaker-
How did the other precious metals fare?
than-expected first quarter US GDP print also gave support to
Silver, platinum and palladium prices reacted in a similar
gold prices on Tuesday. However, the move ran out of steam
manner to gold prices. Prices only modestly profited from
around USD 1,210 per ounce. Meanwhile, the US dollar fell
weakness in the US dollar. However, they fell sharply,
under heavy pressure, especially versus the euro. So gold
especially silver prices, when better US data pushed the dollar
prices barely profited from the considerable dollar sell-off. This
higher.
is rather remarkable, because in general gold prices rally when the US dollar falls. Why did gold prices not rally further? In
More weakness ahead
short, safe haven assets were out of favour. This was reflected
It seems like precious metal prices are showing greater
in bond prices falling aggressively and both the yen and gold
sensitivity to positive US data surprises and a higher US dollar
barely profiting from weakness in the US dollar. In general, the
than vice versa. Indeed, as the above-mentioned shows, they
rise in US Treasury yields is negative for gold prices. But the
barely profited from a weak dollar, but fell sharply on better US
effect was neutralised by the weaker US dollar, which is in
data and a dollar recovery. This signals that the risk is mainly
general positive for gold prices.
on the downside in precious metal prices. Our conclusion is that price weakness has further to run. Therefore, we remain
Gold barely profits from dollar weakness Gold price
negative on the outlook for precious metal prices. US dollar index
1300
105
1250
100
1200
95
1150
90
1100 Jan 15
85 Feb 15
Mar 15
Apr 15
May 15
ABN AMRO forecasts End period Gold Silver Platinum Palladium Average Gold Silver Platinum Palladium
01-May Close 14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,181 1,185 1,184 1,100 1,050 1,000 950 900 850 800 15.7 16.6 16.2 15.0 15.5 16.0 16.5 17.0 17.5 18.0 1,141 1,216 1,141 1,100 1,150 1,200 1,250 1,300 1,350 1,400 798 736 777 650 675 700 700 725 750 750 Q1 15 1,218 16.7 1,194 786
Q2 15 1,142 15.8 1,120 693
Q3 15 1,075 15.3 1,125 663
Q4 15 1,025 15.8 1,175 688
Source: ABN AMRO Group Economics
Gold price (lhs)
US Dollar index (rhs)
Source: Bloomberg,
…but fall back when US dollar recovers The Fed statement was not as dovish as some investors had hoped. As a result, the dollar recovered slightly after the release of the statement and gold prices edged lower. However, when US jobless claims came in much stronger and the employment cost index a touch higher, the dollar recovered
2015 Q1 16 Q2 16 Q3 16 Q4 16 1,115 975 925 875 825 15.9 16.3 16.8 17.3 17.8 1,154 1,225 1,275 1,325 1,375 707 700 713 738 750
2016 900 17.0 1,300 725