Precious Metals Weekly
Group Economics Macro & Financial Markets Research
What is the trend?
Georgette Boele, tel,+31 20 6297789
27 May 2015 • • • •
Under pressure again… …but a strong trend is still missing… We expect precious metal prices to weaken in the coming months… …and a price divergence afterwards between gold (lower) and the others (recovery)
Under pressure again…
…but a strong trend is still missing
What started as an indirect US dollar move hurting precious
As we indicated in earlier publications, investors are pulled
metal prices transformed itself into a direct US dollar move.
back and forward in precious metal markets. Every time gold
This sound very complicated, but in fact it means the following.
prices pop up above USD 1,200 per ounce, gold bulls expect a
On 18 May, the supportive environment for gold and other
start of a new uptrend, while gold bears expect a restart of the
precious metal prices came to a halt. Comments from ECB
downtrend when they see USD 1,180 per ounce. Behaviour in
Executive Board member Benoit Coeure announced in a
other precious metal prices shows a similar pattern. Whereas
speech that the ECB would frontload asset purchases in May
the picture in platinum prices looks least constructive, that of
and June ahead of the summer lull, when new issuance will
palladium prices is the most constructive. The main reason for
dry up and activity eases due to holidays. This resulted in
this behaviour is offsetting drivers and uncertainty about the
considerable euro weakness. Meanwhile investor investment
global growth outlook and the start of Fed monetary policy
towards the US dollar improved. Therefore, the US dollar was
tightening. As soon as uncertainty will start to wane, a direction
able to profit more from euro weakness than gold did. So the
will become clearer.
gold price denominated in dollars moved lower. More weakness ahead Afterwards, US inflation and economic data have come in
For the coming months, we anticipate price weakness in precious
above expectations. As a result, investors have modestly
metals. This is mainly because we expect a higher US dollar and
adjusted upwards their Fed interest rate expectations for 2015
higher US interest rate expectations to lead to further investor
and 2016. This has supported the US dollar across the board
position liquidation. We also remain negative on gold for 2016 for
and has weighed on precious metal prices. This week US GDP
the same reasons. But at some point in the coming months,
second estimate will be released. Currently, expectations in
economic fundamentals will come to the rescue and support silver,
financial markets are too negative in our view. So a more
platinum and palladium prices.
optimistic outcome will probably result in higher US dollar and interest rate expectations and weigh further on precious metal
ABN AMRO forecasts
prices.
End period Gold Silver Platinum Palladium
Not so clear trend recently Gold price
27-May Close 14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,185 1,184 1,100 1,050 1,000 950 1,188 900 850 800 15.7 16.6 16.7 15.0 15.5 16.0 16.5 17.0 17.5 18.0 1,216 1,141 1,100 1,150 1,200 1,250 1,300 1,350 1,400 1,124 798 736 785 650 675 700 700 725 750 750
US dollar index
500
Average Gold Silver Platinum Palladium
400
Source: ABN AMRO Group Economics
700 600
300 200 100 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 GOLD/EUR index GOLD/USD index Source: Bloomberg,
GOLD/CNY index GOLD/JPY index
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
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