Precious Metals Weekly
Group Economics Macro & Financial Markets Research
17 December 2015
Fed lift-off started Georgette Boele Co-ordinator FX & Precious Metals Strategy Tel: +31 20 629 7789 georgette.boele@nl.abnamro.com
• Cyclical precious metal prices are holding up well • The start of the Fed rate hiking cycle is out of the way… • …but position liquidation by investors will likely continue because of higher US rates and a stronger dollar
Cyclical precious metal prices are holding up This week has been a positive one for cyclical precious metal prices, especially platinum and palladium (+2.5%, and +2.9% respectively). There are several reasons for this. For a start, economic data from China came in above market consensus and this supported sentiment somewhat. Also eurozone data were strong. This has improved the outlook for industrial platinum and palladium demand somewhat. In addition, eurozone new car registrations jumped 13.7% in November. Recently Chinese car sales also showed a pickup. These are signs that car sales demand is picking up which is supportive for autocatalyst demand. The fact that lower oil prices did not have a long-lasting impact on cyclical precious metal prices may be a signal that the downside is limited for now.
Palladium autocatalyst demand In thousand troy ounces 2015 = forecast
7000 6000 5000 4000 3000 2000 1000 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 EU
China
North America
Japan
Rest of the world
Source: Bloomberg, ABN AMRO Group Economics
The start of the Fed rate hike cycle out of the way… Yesterday, the US Federal Reserve hiked interest rates by 25bp and delivered a dovish statement. This was widely expected. After the decision and during the press conference, the US dollar and precious metals were volatile. Fed Chair Yellen’s confidence in the strength of the US economy supported the US dollar in the end. This also resulted in lower precious metal prices, especially platinum and palladium prices. This was partly due to the
Insights.abnamro.nl/en
2
Precious Metals Weekly - Fed lift-off started - 17 December 2015
stronger US dollar and partly due to the fact that current prices are seen as an opportunity to position for price weakness ahead. …and weakness in the months ahead In the coming days and weeks, the downside in precious metal prices may be limited due to low activity as a result of Christmas and New Year. We expect the start of 2016 to be negative for precious metal prices. It is likely that investors will continue to liquidate positions in the months ahead because of a higher US dollar and higher US rates. As a result, new lows in prices could be reached before the end of the first quarter of 2016. We expect gold prices to break below USD 1,000 per ounce in the coming months. Silver prices could drop to USD 13.5 per ounce while platinum and palladium prices could drop below USD 800 per ounce and USD 500 per ounce, respectively.
ABN AMRO precious metals forecasts Changes in red/bold
End period Gold Silver Platinum Palladium Average Gold Silver Platinum Palladium
17-Dec Close 14 1,185 1,067 15.7 14.1 1,216 861 798 559 Q1 15 1,218 16.7 1,194 786
Q2 15 1,193 16.4 1,129 759
Source: ABN AMRO Group Economics
Mar-15 Jun-15 1,184 1,172 16.6 15.7 1,141 1,081 736 674 Q3 15 1,126 15.0 993 618
Q4 15 1,106 14.8 905 651
Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 1,112 1,000 975 950 925 900 900 950 975 1,000 14.5 13.5 13.5 14.0 14.5 15.0 15.5 16.0 17.0 18.0 910 800 775 800 850 900 950 1,000 1,050 1,100 652 530 500 525 550 600 625 650 675 700 2015 Q1 16 Q2 16 Q3 16 1,165 988 963 938 15.9 13.5 13.8 14.3 1,075 788 788 825 700 515 513 538
Q4 16 913 14.8 875 575
2016 950 14.1 819 535
Q1 17 900 15.3 925 613
Q2 17 925 15.8 975 638
Q3 17 963 16.5 1,025 663
Q4 17 988 17.5 1,075 688
2017 944 16.3 1,000 650
3
Precious Metals Weekly - Fed lift-off started - 17 December 2015
Find out more about Group Economics at: https://insights.abnamro.nl/en/
DISCLAIMER This document has been prepared by ABN AMRO. It is solely intended to provide financial and general information on economics.The information in this document is strictly proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer. No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such information. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained in this document after the date thereof. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether the relevant product 窶田onsidering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material. ﾂｩ Copyright 2015 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO").