Precious Metals Weekly
Group Economics Macro & Financial Markets Research
Emission scandal impact?
Georgette Boele, tel,+31 20 6297789
23 September 2015 • • •
Rally in precious metals ran out of steam as the US dollar recovered on Fed comments Palladium prices outperformed while platinum was the weakest precious metal Platinum/palladium divergence to stay for now and higher US dollar to weigh
Why did the rally in gold ran out of steam?
Platinum demand
Gold and other precious metal prices received support after
In thousand troy ounce
the dovish-sounding Fed. However, their rallies quickly ran out
8,000
of steam mainly because of a resurgence of the US dollar.
6,000
Since the meeting, FOMC members have clearly expressed that last week’s outcome was a close call and that a lift-off this
4,000
year remains likely. This has given a boost to the US dollar.
2,000
USD/JPY is back above 120, EUR/USD dropped to the low
0
1.11s (more than 3.5 cent lower than Friday’s high).
-2,000 05 06 07 08 09 10 11 12 13 14 15 F 16 F
Unsurprisingly, gold and silver prices have also moved lower. However, weakness in equity markets has protected the downside somewhat. Why did palladium prices outperform? Palladium has been the only precious metal beating the US dollar so far this week. The main question is why? Palladium is
Autocatalysts
Jewellery
Retail investment
Other industrial demand
Source: Thomson Reuters Datastream, GFMS, ABN AMRO Group Economics
Divergence to stay for now and higher USD to weigh It is likely that the divergence between platinum and palladium
by nature the precious metal that is most exposed to the global
prices in the near-term will continue as long as more details
economy especially the US and emerging markets. It is mainly
about this scandal are released. As a result, palladium prices
used in catalytic converters in engines for gasoline cars. Since
will likely move further away from our year-end call of USD 525
the Fed meeting, different forces have been opposing each
per ounce. In contrast, stronger US data releases and
other. One the one hand, the strength of the US economy has
expectations of a Fed rate hike in December should weigh on
been a positive factor, while a stronger US dollar and weaker
precious metal prices, especially gold and silver prices. We
outlook for emerging market economies have weighed on
see more downside in gold, silver and platinum prices in the
palladium prices.
near-term. The outlook for gold prices will remain negative for 2016 in our view. The prospect of a Fed lift-off, higher US
An extra dynamic has been added to this field of forces, namely the diesel scandal. A scheme intended to dupe regulators and consumers about emissions of diesel engines installed in cars has come to the front. If consumers lose confidence in diesel cars, this will have a substantial impact on future platinum demand. We suspect that as a result of these expectations, platinum prices have fallen more substantially than other precious metals this week. On the other hand, consumers may shift to gasoline cars where mainly palladium is used in catalytic converters in engines. Such expectations could have supported palladium prices and have resulted in palladium prices outperforming other precious metals.
dollar and improvement in investor sentiment remain negative factors.
ABN AMRO forecasts End period Gold Silver Platinum Palladium
23-Sep Close 14 1,126 1,185 15.7 14.8 939 1,216 798 617
Average Gold Silver Platinum Palladium
Q1 15 1,218 16.7 1,194 786
Q2 15 1,193 16.4 1,129 759
Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 1,184 1,172 1,050 1,000 950 900 850 800 16.6 15.7 14.5 15.0 15.5 16.0 16.5 17.0 1,141 1,081 950 1,000 1,050 1,100 1,150 1,200 736 674 550 525 500 525 550 600 Q3 15 1,111 15.1 1,015 600
Q4 15 1,025 14.8 975 538
Source: ABN AMRO Group Economics
2015 Q1 16 Q2 16 Q3 16 Q4 16 1,137 975 925 875 825 16.0 15.3 15.8 16.3 16.8 1,078 1,025 1,075 1,125 1,175 700 513 513 538 575
2016 900 16.0 1,100 534