Precious Metals Weekly
Group Economics Macro & Financial Markets Research
Platinum to win over gold
Georgette Boele, tel,+31 20 6297789
15 July 2015 • • •
The improvement in investor sentiment hurt gold and silver and supported palladium Platinum remains our favourite precious metal… …while we expect gold prices to continue to fall
Impact of a Greek deal on precious metals
opportunity to position for outperformance of platinum versus
On Monday, the news about a deal between Greece and its
gold, as we expect this ratio to drop substantially.
creditors resulted in an improvement in overall investor sentiment. This supported the US dollar across the board,
…and gold to be out of favour
because the market focus shifted again from Greece to
A substantial drop in the gold/platinum ratio will not only stem
monetary policy divergence. Last Friday, Fed’s Yellen made it
from platinum prices moving higher, but also because we
clear that rates hikes are on the cards this year. We expect the
expect gold prices to decline. A stronger US dollar and higher
Fed to start hiking rates in September, followed by another
US interest rates will push gold prices towards USD 1,000 at
hike in December. Currently, financial markets anticipate only
the end of this year in our view. This will be the result of
one rate hike this year.
investors liquidating positions. If Fed’s Yellen were to continue to sound somewhat hawkish tomorrow, gold prices could break
In addition, the improvement in overall investor sentiment has
crucial support level at USD 1,130 per ounce.
resulted in lower demand for safe haven assets, such as the Japanese yen, the Swiss franc and to a lesser extent gold and
Price performance this week
silver. Thus prices of these assets have come under pressure.
Performance in % with USD as basis
0
Why have investors remained cautious? There are two major reasons for this. For a start, incoming US
-1
economic data have been on the weak side, most notably US retail sales. This has weighed on the outlook for possible rate
-2
hikes this year, and consequently the US dollar. In addition, national parliaments still need to approve the Greek deal. Today it has to be approved by the Greek Parliament, while the German Bundestag will vote on Friday. So, significant risks
-3 -4 Palladium
Platinum
Gold
Silver
remain (see also our note on the Greek deal).This will prevent investors from becoming fully risk seeking. However, this morning, Chinese GDP came in a touch better, which should
Source: Bloomberg
have calmed fears about a hard landing in China.
ABN AMRO forecasts Platinum to remain our preferred precious metal… We stick to our view that platinum prices have fallen enough and that they should start rising again. For a start, fundamentals have been improving, despite the Greek saga. Indeed, we expect that a Grexit will only have limited impact on the eurozone economy, which is a crucial market for platinum auto catalyst demand. In addition, Chinese authorities will do whatever it takes to avoid a hard landing in China. As such, we remain constructive about Chinese jewellery demand for platinum, gold and silver. Last but not least, speculators have increasingly taken short platinum positions, while the gold/platinum ratio is at extreme high levels. We see this as an
End period Gold Silver Platinum Palladium
15-Jul Close 14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,155 1,185 1,184 1,172 1,100 1,000 950 900 850 800 15.7 16.6 15.7 15.3 15.0 16.0 16.5 17.0 17.5 18.0 1,027 1,216 1,141 1,081 1,150 1,200 1,250 1,300 1,350 1,400 798 736 674 657 650 650 675 675 700 725
Average Gold Silver Platinum Palladium
Q1 15 1,218 16.7 1,194 786
Q2 15 1,193 16.4 1,129 759
Q3 15 1,136 15.4 1,115 662
Q4 15 1,050 15.5 1,175 650
Source: ABN AMRO Group Economics
2015 Q1 16 Q2 16 Q3 16 Q4 16 1,149 975 925 875 825 16.0 16.3 16.8 17.3 17.8 1,153 1,225 1,275 1,325 1,375 714 663 675 688 713
2016 900 17.0 1,300 684