As the first and shortest of a three part article this week we would like to take a mid year pause and review how the metal markets have moved and where we expect they will go during the balance of this year and next.
Gold and silver have both dropped, 33% and 22% respectively from their highs in mid-March, due almost directly to the strengthening dollar. Demand for both from industry and jewelry is weak and their strength this year has been driven by anti dollar sentiment speculation rather than sound fundamentals. With the dollar strengthening we are running against the forecasts from much of the investment/mining sector which sees prices rallying later this year. We don’t see it in the current climate. We don’t see a crash but equally we do not see gold back around $1000/oz.
Platinum is looking vulnerable as car production stalls and supply concerns ease particularly in South Africa. Palladium often gets linked to Platinum by the producers but in reality there is no reason why it should, the supply sources are completely different. As we have called out in recent articles we can’t see any upside to these two metals and indeed expect further weakness for palladium going forward.
Tomorrow we will continue with our base metals summary and on Wednesday our steel review.
–Stuart Burns & Lisa Reisman