Key trends at precious metals market
Analysts of PLAURUM have prepared an analysis of the key trends in the precious metals market that are expected to be relevant during the second half of 2017. The price of gold may go up under the influence of risks in the global economy and the FRS interest rates rise, and will cause platinum price increase. The silver price will increase due to growing investment demand, palladium will not be allowed to depreciate sharply by the rise in global production of gasoline cars, while the price for iridium and rhodium will continue to be much higher than in the last year due to the continuing shortage of these metals on the market.
Gold and Silver
The current gold price per ounce is at $1,265. For ourselves, we have currently factored in a range between $1,120 and $1,350 per ounce, and at this time we are not planning to revise these expectations. The current price is relatively high, however, there is potential for it to rise further. The main factor driving the price increase may be another rise in the FRS interest rates as the news background surrounding this event will push the gold price up to the $1300-1350 level. The demand for gold is mainly generated by investors, which means that it will rise whatever potential risks there may be in the world economy. Silver has been trading at the level of $16.6 per ounce, which is a rather low price. At this level, we are witnessing a growth in the investment demand for silver (on the part of the world industry, demand remains stable), therefore during the second half of 2017 we expect the price to hover between $18 and $19. It is our opinion that the main driver pushing silver up is the decline in the US dollar index.
Palladium and Platinum
Palladium has been actively traded on the world market in June-July of this year. At the same time, palladium futures were several percentages cheaper than physical metal due to the deficit of the latter. The market saw a rare situation when physical demand exceeded physical supply. In the meantime, the palladium price jumped up sharply. For some time it was traded at $920 per ounce, however, it quickly went down below $900. The price is still rather high. We believe that this trend is likely to decline in the near future. The exchange market sees this risky situation on the market. The change of the guarantees creates a situation for volatility rise, so palladium price will either precipitously fall down or shoot up. We feel that no sharp increase is to be expected, the situation with physical metal availability is now back to normal, the market for physical metal and futures has by now leveled off and the difference in value that was pushing palladium up has ceased to be a driver. On the other hand, there should be no rapid fall, either. That is, we are anticipating price fluctuations which, however, are to stay within a narrow range. The point is that the majority of the world demand for palladium is generated by consumption in the automotive industry. The more cars are sold, the more palladium is needed by the manufacturers. Vehicle sales in the countries of Europe, China and Japan in 2017 have been showing growth; in the USA there has been a market decline, however, it was insignificant. At the same time, it is important that demand for gasoline cars has exceeded demand for diesel ones, mainly against the backdrop of “dieselgate”. In the catalytic systems of the gasoline cars the proportion of palladium used constitutes 70%, while in diesel cars it accounts for about 30%. That is why palladium, even if it does show decline, it will be down to a threshold of $800-$820.
Compared to the last year, export of platinum from Russia has been stable; but we can see a slight increase. In the market of North America (Canada, USA) the situation is the reverse, i.e., the export is stable with marginal minus. In South Africa, there has been a drop in production of platinum and palladium. Demand for platinum both from investors and the industry has been on the decline. This trend is also applicable for Russia as its platinum market, on the whole, is following the global market trends. Therefore, the platinum price per ounce is relatively low and is staying at the level of $945. Nevertheless, platinum, before the end of the year, may overcome the psychological threshold of $1,000 and hit the level of $1,020 per ounce. This may happen, mainly, against the background of the gold price rising to $1300 per ounce as we expect. Also, platinum may be pushed up by further appreciation of palladium and the depreciation of the US dollar. If the price declines, according to our forecast, the decline will be very marginal, down to $880-$900.
Since the beginning of 2017, iridium and rhodium have been traded at the level of $990 and $970 per ounce respectively. Based on the fact that both metals cost approximately $700 per ounce each in 2016, the price growth is phenomenal. The trend can by explained by the low supply of these metals on the market, and there is a great demand for them. Demand for rhodium is generated by manufacturers of auto catalysts and catalytic systems, and the glass industry in Russia, China, Turkey and Europe; demand for iridium is generated by the automotive industry (the metal is used in production of ignition spark plugs). However, until the end of the year, prices for iridium and rhodium will continue to be high and this is a constraint for further growth in demand.
About Plaurum: Plaurum brand incorporates production facilities in Russia (JSC “EZOCM”, JSC «UPCR», LLC «UPCP»), Central Europe (Safina a.s.), and the People’s Republic of China (Guoda Safina), as well as sales offices in the USA, Slovakia, Poland, Romania, and Kyrgyzstan. The Group is developing the following major dimensions: processing poor man-made and mineral hard-to-extract raw materials containing precious metals, providing services of purchasing, processing, refining, and delivering refined precious metals, manufacturing industrial materials and goods from alloys based on precious metals, providing engineering services on developing new technologies and products, analyzing different types of raw and other materials containing precious metals, developing qualifications and a service package on rare-earth and non-ferrous metals.