Precious Metals Weekly
Group Economics Macro & Financial Markets Research
Another shoe to drop
Georgette Boele, tel,+31 20 6297789
22 June 2015 • • •
Palladium prices also break lower… …as investors have changed their behaviour towards palladium Silver and gold prices will also likely drop in the coming weeks
Another shoe to drop: palladium prices also break lower
have seen this pattern developing in 2013 in gold, in silver
Platinum prices were the first precious metal prices that have
since 2013, in platinum in 2015 and now also in palladium. In
fallen out of the trading range. Recently, palladium prices have
short, this means that investors also start to take downward
followed by also breaking lower to a level not seen since
price movements into account. This is a significant change in
December 2013. In general, the technical price picture has
attitude in our view. The fact that the outlook of a supply deficit
sharply deteriorated. If prices close below USD 700 per ounce
has not rendered higher palladium prices early this year was a
(previous low), this could easily result in prices dropping
warning sign just like the platinum supply disruption in South
towards USD 633 per ounce. Palladium prices are now the
Africa last year did not sent platinum prices higher. We believe
second shoe to drop. We expect another pair of shoes (silver
that investors have started to liquidate palladium positions and
and gold) to drop in the coming weeks when Fed rate hikes
that there are still substantial positions in the market to be
come into focus and the US dollar rallies.
liquidated. Our end of June call of USD 650 per ounce may still be far away, but it could come quicker than the market
Palladium prices also break lower…
currently envisages.
US dollar per ounce
…driven by position liquidation
1,000
Number of contracts
palladium price
900 40,000
1,000
800
900 30,000
700
800 20,000
600
700 600
500
10,000 500
400 10
11
12
13
14
15
0
400 10
11
12
13
14
15
Source: Bloomberg
Short contracts
Why have prices moved lower?
Net positions
Palladium price
Source: Bloomberg
In general, a deterioration in investor sentiment, more specifically worries about the state of the Chinese economy sentiment, has had a pronounced negative impact on
ABN AMRO forecasts
palladium prices. In addition, there have been reports about
End period Gold Silver Platinum Palladium
22-Jun 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 1,183 900 850 800 15.7 16.6 16.1 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 1,062 798 736 700 650 675 700 700 725 750 750
Average Gold Silver Platinum Palladium
Q1 15 1,218 16.7 1,194 786
more substantial supply from recycling resulting in an anticipation of a lower supply deficit this year. Last but not least, investors finally seem to have lost patience with the most favourite precious metal in town. Are investors starting to behave differently? Yes, we think so. Up to recently, investors were very reluctant in building short positions on the futures markets, because they held a positive view about overall palladium outlook. We
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