Precious Metals Weekly
Group Economics Macro & Financial Markets Research
First shoe to drop
Georgette Boele, tel,+31 20 6297789
17 June 2015 • • •
Platinum prices break lower, mainly because of a deterioration in eurozone investor sentiment Gold/platinum ratio near extreme levels… …signaling that relative underperformance of platinum is not here to stay
First shoe to drop; platinum prices break lower
the graph below shows, investors have reduced net-positions
Platinum prices are the first precious metal prices that have
in platinum. Even though net-positions have been reduced
fallen out of the trading range. We expect other precious metal
significantly, total ETF positions are still sizeable. Therefore,
prices to follow. Platinum prices broke below the previous low
further position liquidation could weigh on platinum prices in
and there are no major support levels except the 2008 low just
the near-term.
below USD 800 per ounce. This signals that prices could fall
Weaker eurozone sentiment weighs on platinum
further.
Number of contracts
What has caused this movement?
Platinum price
60,000
In general, a deterioration in investor sentiment, more
1,800
50,000
specifically eurozone sentiment, has had a pronounced
1,600 40,000
negative impact on platinum prices (see graph below). Platinum prices have the tendency to weaken when equity
30,000
volatility increases and equity markets weaken. In addition, the
20,000
widening of eurozone periphery spreads also signal a
10,000
1,400 1,200
deterioration in sentiment. This is because of the stand-off between Greece and its creditors. Despite our view that there
0 Jan 13
will be an agreement between, the risk of a Greek “accident”
Jan 14
Jul 14
Net positions (lhs)
(default or even Greek exit) is increasing. This weighs on the economic outlook and sentiment of the eurozone. For
Jul 13
Jan 15
1,000 Jul 15
Platinum prices (rhs)
Source: Bloomberg
platinum, eurozone demand accounts for 40% of its annual catalyst demand.
Gold/platinum ratio near extreme The considerable underperformance of platinum prices among
Weaker eurozone sentiment weighs on platinum Platinum price
precious metal prices has pushed the gold/platinum ratio up to
10y spread Italy - Germany
1,300
0.50
near-extreme levels. This situation is unsustainable in our view. The relative weak price will make platinum attractive as a substitute for white gold in jewellery. In addition, more
1,200
1.00
optimistic news about Greece, a higher US dollar and higher US interest rates should result in platinum outperforming gold, because gold has a higher sensitivity to the latter two.
1,100
1.50
ABN AMRO forecasts 1,000 Jan 15
Mar 15 Platinum price
May 15
2.00 Jul 15
10y spread Italy - Germany
Source: Bloomberg
Investors have been liquidating The weakening sentiment towards platinum is also reflected in the latest speculative net-positioning (up to last Tuesday). As
End period Gold Silver Platinum Palladium
17-Jun Close 14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,180 1,185 1,184 1,100 1,050 1,000 950 900 850 800 15.7 16.6 16.0 15.0 15.5 16.0 16.5 17.0 17.5 18.0 1,077 1,216 1,141 1,100 1,150 1,200 1,250 1,300 1,350 1,400 798 736 731 650 675 700 700 725 750 750
Average Gold Silver Platinum Palladium
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
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