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Forecast 2008

• Gold
• Silver
• Platinum
• Palladium

These tables show our analysts’ forecasts and commentary for 2008. All prices are in US dollars. Click on a metal in the heading above to see the predicted highs, lows and average prices. Click on a column head to sort the table, and on the name of a person for his commentary.

• found the review
• Adrien Biondi Last year was a very good one for bullion and the whole industry has profited from the move. Newcomers to the precious metals markets and the general public assume that this bull run will be an ongoing process, especially with the latest subprime crisis and the highs in oil, although we tend to have a more cautious approach. Of course the crisis is mainly limited to OECD countries, and the booms in China and India haven’t shown any signs of weakening. The shift in consumption away from the traditional North American and European economies, which had been responsible for the lion’s share of global consumption, to the new economies is also very bullish for precious metals. The constant demand from China and India for natural resources has added momentum to the precious metals market.We fear that a move lower during 2008 may stop this euphoria for a while, but a correction is healthy for any bull market: 2008 will be a consolidation period.
  
  There is a potentially difficult year ahead for PGMs, with high prices sapping demand within the jewellery sector along with other bearish factors in the West such as diminishing car demand, although this may be partially offset by expansion in the Far East. Adding to this, some uncertainty over global supply levels for the coming year makes choosing the correct averages very challenging. But with recent record highs, again looking for some correction in 2008 would put more pressure on platinum than palladium. The larger amounts of platinum held in hedge funds and commodity-linked index products weigh on the more expensive sibling.
• Stephen Briggs We approach this year’s forecasting survey with even more trepidation than usual. Our bearishness last year was based mainly on the house view that the US dollar bear market would come to an end. Both were misplaced, but until very recently the house view still was that the US dollar would appreciate markedly against the euro in particular over the course of 2008, and even now some recovery is forecast in the second half. This is not the consensus view and it is very far from that within the gold market. Yet there may be other reasons too to take a bearish stance. Although gold’s internal fundamentals may remain broadly positive, they are much less supportive in the recent price environment, and it is only a matter of time before one factor, producer de hedging, loses its force. This leaves gold overly dependent on investors.
• Stephen Briggs If gold does finally turn down, silver will, we believe, be particularly exposed. Its fundamentals are less solid, with, notably, photographic demand still in rapid decline and mine production showing clear signs of picking up, and its bull market has been even more dependent on investment in general and ETF demand in particular. Silver’s legendary volatility suggests that prices could at some point fall very heavily indeed.
• Stephen Briggs In contrast, we share the strong consensus view that platinum has robust fundamentals, perhaps the strongest in the sector, especially after the big production losses of 2007 that tipped the market back into deficit. Even if the South African industry manages to get back on track this year, the market will remain tight, and after massive price-driven destruction there is much pent-up jewellery demand. Platinum appears to us fairly fully priced and it will not be immune to any weakening of gold, but the correction we expect should be relatively contained.
• Stephen Briggs On the face of it, palladium’s prospects look more akin to those of silver. Inventories are high and supply has been more resilient recently than in the case of platinum. However, demand prospects are good, the price is, or at least is perceived as low compared with the other precious metals, investors appear happy to absorb Russian stockpile sales, and these may at some point dry up. Palladium could even make some independent progress, although it too cannot be impervious to any softness elsewhere.
• Tom Butler In 2007 the average price of silver rose by 16%, much less than the 58% increase seen in 2006, but nevertheless a relatively positive performance. Compared to the behaviour of the other precious metals, however, with both gold and platinum achieving new all-time record price levels, silver has been somewhat neglected. Fundamentally the outlook for silver remains one of surplus, with new industrial demand strong, but consumption in photography and jewellery is expected to decline. So long as the gold price continues to strengthen and the dollar remains under pressure, then silver can be expected to benefit as well. The real key to its price performance in the year ahead will be investment, mainly through ETFs. If enough investors can be persuaded that silver is cheap compared to other precious metals, then it could assume an inflationary hedge role and press higher once more.
• Jeffrey Christian Political, economic, and financial market concerns will cause investors to continue buying historically high volumes of physical gold. In December 2006 we said 2007 would be a year of great volatility across markets. It was. We expect 2008 to see even greater volatility, in currency markets, equity markets, and precious metals prices. Mine production will rise, as will scrap recovery. Central banks will continue to sell gold, but the key factor directing gold prices will be investment demand, as it always is.
• Jeffrey Christian Silver prices will continue to rise, pushed higher by the same wave of investor anxiety that is driving gold, and will be even more extreme than those of gold. Prices could spike sharply lower, but the bias will remain toward higher prices. Industrial demand, especially in electronic applications, will apply additional upward pressure. The physical silver market is far less liquid than that of gold, which should lead to more volatile price swings. People speak of the fact that silver ‘lagged’ gold by ‘only’ rising 15.3% from end-2006 to end-2007, while gold rose 31.3%. They overlook the fact that while gold prices rose 23% in 2006, silver rose 45.5%. Gold was playing catch up with silver last year.
• Jeffrey Christian Platinum prices may continue to trade around record levels during the first half of the year, but could sell off significantly during the second half. If South African production continues to be disrupted, platinum will remain high. Barring continued disruptions, South African output could rise in a year that sees slower growth in industrial use. Investors might sell in the second half of 2008, especially if they grow more fearful of either a 2009 recession, a shift away from platinum in auto catalysts, or both.
• Jeffrey Christian Palladium will participate more fully in the investor buying spree expected to continue in precious metals this year.
• Suki Cooper In our view, gold prices are set to post positive gains for the seventh consecutive year on an annual average basis. Following a significant swing into deficit last year, the market fundamentals remain tightly balanced and external drivers remain positive. Even with the dollar stabilising at its recent lower levels, investment demand remains strong. Gold prices were buoyed by investor interest and this is likely to remain the key price determinant this year. External factors such as higher inflation expectations, broader economic concerns, geopolitical tensions and Fed rate easing are likely to drive prices higher. On a fundamental basis mine supply remains constrained and physical and investment demand should emerge upon price dips providing a price floor.
• Suki Cooper Silver prices have benefited from the positive price evolution of gold rather than its own supply/demand balance, which appear unfavourable. We forecast the market will move into surplus this year given the strong growth in mine supplies exacerbating a period of weak demand growth. Speculative interest remains key and despite its own fundamental balance we believe prices will continue to track gold this year, benefiting from its price appreciation.
• Suki Cooper Platinum was the strongest performer last year and in our view it will outperform again this year. Inventories remain at historically low levels and the impact of the mine supply disruptions last year is likely to extend into this year, especially as South Africa continues its audit of mines following the spate of fatal accidents. After its sharp swing back into negative territory last year, the platinum supply-demand balance is staged to post another deficit, albeit smaller than the previous year. Limited growth in supplies is likely to be more than offset by robust demand. The demand growth trend is expected to stay intact for the 16th consecutive year, buoyed by growth in the auto-catalyst sector and boosted by the tightening emissions legislations and the limited substitution of palladium in diesel vehicles. After a slow start, demand for the ETFs has risen substantially, which further tightens the platinum supply-demand balance.
• Suki Cooper Palladium prices posted the smallest gains within the complex last year as its weak fundamentals capped upside potential. Price appreciation was buoyed by the rest of the complex performing well and strong speculative interest. These factors are again likely to be key as palladium’s supply-demand balance is set to post its sixth year of a surplus greater than 1Moz. Physically-backed ETFs were well received, but a key support for prices will be removed should palladium fall out of favour with investors. Growth in autocatalyst demand remains healthy but is likely to be outpaced by supply from both scrap and mine output and, coupled with large above-ground inventories, any significant price appreciation is likely to be limited.
• David Davis Upward pressure on the gold price is likely being driven by the US economic environment, rising oil and commodity prices and a change in the dynamics surrounding supply and demand. These combined factors have resulted in a weakening of the US dollar, which in turn has driven gold higher.
  
  Turning to supply-and-demand fundamentals, over the longer term, our studies indicate that global gold production (primary supply) will begin to decline as the diminishing number of new reserves fails to compensate for dying mines. The decline in production will likely be accelerated should the gold mining industry continue to incur significant year-on-year inflation rates which are not offset by similar or significantly higher gold price increases.
  
  We believe central bank sales will likely wither going forward, and the banks could become net buyers. Producer de-hedging has accelerated in recent years. In particular, we expect that AngloGold Ashanti could enter the de-hedging market, contributing an additional 3 to 3.5 million ounces during 2008. We also believe investment demand (ETFs) will continue to be robust during 2008. Volatile and higher gold prices coupled with the expected economic slowdown in the US and Europe could, however, stem jewellery demand in these areas, but demand from China and India will likely remain positive.
  
  Geopolitical tensions, which generally lead to higher gold prices and price volatility, have heightened with the political turmoil in Pakistan after the assassination of Benazir Bhutto and the cross-border operations of Turkish troops to hunt down Kurdish separatists in Iraq. Tensions are also ever-present between the US and Iran and the US and North Korea.
  
  Given this longer-term scenario, we believe the supply-demand imbalance going forward will begin to accelerate at an ever-increasing pace into a net deficit, which in turn will likely put significant upward pressure on the gold price.
• David Davis Silver prices only rose 14% year-on-year (2006-2007), having put gains of 25%, 38% and 42% over the previous three years. We believe silver prices will likely play ‘catch up’ when compared to the year-on-year increases of the previous years, but also and more importantly, silver prices will likely receive impetus from the upward trend in platinum and gold prices and the investment (ETF) market. In the long term gold and silver prices have been closely correlated. The fundamentals of the silver supply and demand dynamics are unlikely to have a major effect on driving the price. Silver has the potential to break through 20 by the end of the year.
• David Davis Platinum will likely continue its upward trend on the back of the current economic environment just described for gold. In addition, GFMS and Johnson Matthey believe platinum supply will be moving into a deficit position in 2007, mainly as a result of a shortfall in supply from South Africa, which produces some 78% of global platinum supply. Anglo Platinum and Lonmin revised their 2007 and 2008 projections downwards during 2006. South African platinum production was also affected by a series of safety-related shutdowns, industrial action and project delays. We believe the deficit in platinum supply will be prolonged by at least three to four years, which in turn will likely put further upward pressure on the price and, thereafter, continued tight supply and demand dynamics will likely follow.
  
  Increased vehicle production from China and India, together with the increased likelihood of an ever-increasing switch to diesel powered vehicles in the US, will likely keep prices buoyant going forward. However, GFMS have observed that the recent record high prices have caused a renewed drive to substitute platinum with palladium. GFMS also report manufacturers incorporating palladium in diesel autocatalyst systems. Thrifting and substitution of platinum have been common practices in the past, but they were, in the main, offset by tightening environmental legislation, which generally increases the demand of platinum used per vehicle. Tightened environmental legislation is to be enforced at the end of 2008 in Europe and in 2010 the US.
• David Davis Both Johnson Matthey and GFMS indicate that the demand for palladium is likely to increase by around 2% to 3% in 2007. Notwithstanding a predicted surplus of palladium in 2007, there are abundant stocks of palladium in Russia and Switzerland. The significant supply-demand surplus in the palladium market will likely mean a limited upside price potential for 2008. The palladium price rose by 12% year on year (2006-2007). However, we believe the metal could find support with upside potential should autocatalyst manufacturers move swiftly into the substitution of platinum by palladium. Furthermore, palladium prices will likely follow the upward trends of gold and platinum.
• Walter De Wet The current global economic environment remains bullish for gold, but should ensure that volatile conditions remain.
  
  We see the US economy coming under increased pressure during the first half of 2008. As a result credit spreads should widen further. Combined with sovereign and political risk on the rise in certain countries, we should see support for gold in 2008H1.
  
  The US dollar’s woes are linked to US interest rates declining. The Fed is set to continue easing rates, while the ECB seems unperturbed by slowing economic growth, and is unlikely to cut rates for now.
  
  Although jewellery demand in major centres showed a decline towards end-2007, this must be a continuous trend before any real price impact will be seen.
  
  The new futures contract that started trading on the Shanghai Futures exchange is bound to renew interest in gold as an investment in China. We do believe this impact could be large.
  
  Continued portfolio diversification via commodity investment vehicles should provide support to the metal on the downside.
• Peter Fertig There are three factors that play a dominating role as the driving force of precious metals prices. The price of crude oil serves as a good proxy for inflation fears. The next major fundamental factor is the US dollar exchange rate, as metals are priced in this currency. Here, either the US dollar index or the EUR/USD exchange rate has the closest correlation. And finally, precious metals are not necessarily a safe haven. If investors risk appetite drops due to crisis in financial markets, precious metals are often sold to cover losses. The US stock market provides a good indication of risk aversion.
  
  Crude oil started the year with a bang as it traded at 100/bbl for the first time. However, much of the price increase is based on speculation rather than the underlying supply and demand balance. In 2008, demand is expected to expand less than the consensus view due to a slowdown of G7 economies. In China as well, GDP growth is likely to be lower than last year. By the end of this year, Brent is predicted to be trading at 70/bbl.
  
  Demand from financial investors is far more important than demand from the jewellery industry for the development of precious metal prices. It is often said that investors buy gold as a hedge against rising inflation. However, empirical experience does not bear this out. US inflation has no significant effect on the gold price. Demand from financial investors is largely determined by the US dollar’s performance in the currency markets.
  
  Since the subprime mortgage crisis broke out, what has driven the dollar’s weakness is the expectation that the Fed will cut interest rates so that the dollar becomes less attractive relative to other currencies. Following the recent weak US economic data and the rise in the unemployment rate to 5%, our US economists anticipate that the Fed will start lowering interest rates more aggressively, cutting the Fed funds rate during the first half of the year in four steps of 25bp each to 3.25%. This means that the Fed Funds target rate is well below the ECB refinancing rate.
  
  The US dollar is expected to weaken against the euro to 1.53 in Q2, but in H2 the tables will be turned. US GDP growth should pick up again as early as Q2 and further accelerate after the summer, so that the market will no longer expect further interest rate cuts. In the Eurozone on the other hand weaker growth is expected, so that the ECB should reduce the refinancing rate by 25bp. The US dollar is likely to appreciate against the euro to 1.43. Precious metals will then face a headwind from falling oil prices and a firmer dollar. They will not be able to withstand this pressure and prices should ease significantly. Silver is likely to perform better than gold in H1 but to perform worse in H2. Due to production problems in South Africa and the demand pattern of the automobile industry, platinum is expected to hold better than palladium.
• Rene Hochreiter A slowdown in the creation of new mines, new production and exploration projects should support the price, as well as continued US dollar weakness.
• Rene Hochreiter Continued poor production performances from South Africa’s mines, SA government interference with production for safety reasons and inability of new exploration projects to be brought into production on time, together with legislated-driven demand will keep the price firm for some time to come.
• Rene Hochreiter Declining levels of palladium stocks will likely drive the price higher in 2008.
• Michael Jansen As we prepare our 2008 commentary for the LBMA annual survey, gold is trading around 875, well above the last official forecast we prepared in October 07 when we had expected gold to average 814 for 2008 (at the time spot gold was around 725). Gold is higher in non-USD terms as well, reflecting gold’s own bullish intrinsic fundamentals (falling mine supply, rising cash costs, difficulties in ore body repletion), which continue to be as important as macro thematic drivers such as strong investor demand reflecting gold’s store-of-value proposition as a hedge against inflation and USD weakness. With the EUR/USD projected to trade to 1.5500 over 2008, further upside towards 950-975 is likely. Long liquidation (futures and/or physical) could see the range low tested, but dips are buying opportunities. Indeed, the risks around inflation pressures in 2008H2 are so skewed to the topside that a 975 range top could be seen as too conservative.
• Michael Jansen Silver has less price bullish supply-side fundamentals relative to gold and less robust thematic appeal as well. Indeed, silver can be viewed as a very valuable base metal as opposed to a cheap precious metal given the degree to which it is produced as a by-product of base metal mining, not to mention that it is a less efficient store of value. One of the main reasons many in the market have favoured silver’s outperformance in recent times is its lower level of liquidity relative to gold, but so far the OTC market has coped easily with the build in ETF inventory and we see no reason to expect that the physical market will tighten enough to engineer an outperformance in the year ahead. More mine supply (both primary and by-product) will represent a strong cap around 16 and higher.
• Michael Jansen Regulatory-driven physical demand, a lack of ready substitution in certain applications (for instance diesel autocatalysts), a huge reliance on infrastructure-stressed South Africa for primary production and rising investor demand are stressing the residual volume of above-ground platinum stock and increasingly raising the risk of a significant increase in platinum prices over 2008. Jewellery demand also appears to be less price elastic at current levels (having contracted down to around just 1600-1800mt from around 2800mt 7-8 years ago) and is adding to a positive S&D framework that appears to present limited opportunity for lower prices in 2008. Given liquidity constraints it is not difficult at all to see prices above 1,700 in 2008, even if only briefly.
• Michael Jansen Palladium is to platinum as silver is to gold: too much supply and not enough demand to warrant an exceptionally bullish price outlook. However there is no doubt that the excess of above-ground inventory is dwindling and that palladium has significant scope to continue to take market share off platinum in diesel applications, already having significantly displaced platinum in the gasoline sector. The market though is wary about trading the "ifs" in palladium, as recent rallies have struggled for momentum and lagged the more bullish (from an S&D perspective) platinum market. We are wary though that any slowdown in destocking from Russian producers could easily see palladium catch up, especially if ETF demand continues to build, albeit off a low base.
• Tom Kendall Most key drivers for the gold price will remain bullish in 2008. Interest rate differentials between the US and Europe will turn negative, putting further pressure on the dollar. Inflation is rising, credit contagion is spreading to bond insurers, and geopolitical instability is rife. In addition, commodities remain very much in vogue with almost every category of fund: hedge, mutual, pension, trust, sovereign wealth…as well as with individual investors. The expected launch of an ETF in the Middle East will further broaden investor access.
  
  On the bearish side, the influence of producer de-hedging will diminish and high and volatile prices will see bouts of weakness in jewellery demand, whilst a US recession could see the oil price fall back into the 70s. We also remain wary of sharp corrections in emerging market equities that could be replicated in gold. Nevertheless, for now at least the multi-year bull market is intact and 1,000 gold is a realistic target.
• Tom Kendall Gold’s schizophrenic sister will increasingly be torn between its industrial and precious personalities this year, but the latter is likely to win more often than not.
  
  On the face of it, the fundamentals are less than encouraging: slowing economic growth rates are likely to affect consumption in electronics, demand from the photographic sector is expected to fall further, and there is little to support an upturn in silverware fabrication. At the same time a meaningful supply response to record prices will start to be felt. The influence of the gold price, however, is likely to outweigh all of these factors.
  
  There will almost certainly be short periods when the silver price out-performs relative to gold. However, over the year as a whole the white metal may well lag behind, with the gold:silver ratio widening towards 60 as a result.
• Tom Kendall The supply/demand fundamentals have a very direct bearing on the platinum price and the fundamentals remain highly supportive.
  
  South African producers should, on paper, be able to deliver a significant boost to output this year, but the kind of problems that were seen throughout 2007 – strikes, process-equipment breakdowns, shaft closures for safety reasons, etc. – are again likely to prove disruptive. The situation in Zimbabwe is hardly reassuring either.
  
  On the demand front, tightening emissions limits plus vehicle sales growth in Asia and central Europe should see use of platinum in autocatalysts continue to rise in 2008, despite ongoing substitution in both diesel and gasoline catalyst systems.
  
  As a result, CTAs, hedge funds and the general public in Japan are expected to remain very friendly towards platinum, and platinum exchange traded funds are likely to suck at least another 100,000 oz of much-needed metal out of the market.
• Tom Kendall Bearing in mind its not-too-distant history, it is perhaps a little dangerous to forecast a year of relative stability for the palladium price, but that is the most likely outcome. We see no reason for patient long-term investors in the metal (of whom there are many) to abandon their support; neither do we foresee any marked change in fundamentals that would lead to a tightening of availability. Onwards and slowly upwards then, with just an occasional and slightly nervous glance back at 2000/2001.
• Philip Klapwijk The credit markets crisis has provided fresh impetus to the gold bull market, with the yellow metal benefiting from the ensuing flight to quality. The second order effect of the strains the crisis is placing on the financial system is looser monetary policy, particularly in the United States. The Fed also is being forced into making interest rate cuts because the US economy is headed towards the rocks, a development in no small measure related to fallout from the sub-prime debacle. Recession in the United States means lower stock prices and a weaker dollar – gold’s two largest competitors are therefore likely to under-perform. Throw into this mix a nasty rise in inflation, related high oil prices and continued geopolitical uncertainty, and it is easy to see why investment demand is likely to grow in 2008. A broadening of the gold investment market should more than cope with the headwinds coming from what is likely to turn out to be a very difficult year for fabrication demand, especially its jewellery component.
• Philip Klapwijk Silver is likely to be pushed in two opposite directions during 2008; the metal will face upward pressure from investment demand but worsening supply/demand fundamentals will at the same time militate for lower prices. Investors are likely to have the upper hand, although strong growth in mine production and a slide in fabrication, especially industrial demand due to slower economic growth will act as a considerable drag. Overall, it is difficult not to see silver following gold’s lead higher this year. However, this is likely to be accompanied by continued high price volatility and a wider trading range than for its more valuable yellow cousin.
• Philip Klapwijk As was the case in 2007, the main issue this year for platinum is expected to be South African supply and the ongoing uncertainties regarding output from the country’s mines. This gives an upward bias to prices, even before one takes into account the metal’s tight bullion stock position and traditionally strong correlation with gold. Therefore, although, in the absence of a major setback to South African mine production, the platinum market is likely to record a surplus this year (which will grow in 2009), this is unlikely to be enough to alleviate underlying market tightness and thus darken materially the price outlook.
• Philip Klapwijk Palladium’s supposed Achilles heel remains the large bullion inventories that exist in Zurich and Moscow. Nevertheless, the threat that these are present should not be overstated, particularly if the metal is in reasonably strong hands. After all, these abundant stocks have not prevented substantial price increases in the last two years. In addition, it should be noted that the palladium market is likely to register a substantial deficit in 2008 before any bullion stock mobilisation is taken into account. This will occur due to growth in fabrication demand from autocatalysts, electronics and jewellery (with in all three cases substitution playing an important role) and in spite of a meaningful jump in supply from autocatalyst recycling.
• Martin Murenbeeld The factors we expect to drive gold higher number eight, and other than occasional shifts in importance these haven’t changed in recent years. The most difficult factor to forecast is (1) the geopolitical one, which is partly responsible for the surge in price late 2007-early 2008. I noted last year that (2) the supply outlook is benign, furthermore, whereas (3) infrastructural demand developments in Asia are quite revolutionary in my opinion. This is underscored by the opening of the Shanghai gold futures market. I continue to be a dollar bear: (4) the dollar is seriously overvalued against the Asian currencies and must decline further. If/when it does, we expect to see demand in Asia (already stimulated by growing wealth) increase more. Gold is still very depressed on (5) an inflation-adjusted basis, so has upside room on this account. Dollar reserves in the world are ‘excessive’ and will continue to be (6) diversified. Oil-producing countries are benefiting from high oil prices and some of this wealth will find its way into gold. The boom in commodity demand should continue, and while I don’t think gold is a ‘commodity’ as such, it will benefit indirectly. Cycles (7) in the gold price last many years, and gold is only in year seven. My ace-in-the-hole is (8) monetary reflation: economic weakness would hurt the gold price were it not for expected interest rate cuts and monetary infusions to alleviate credit market problems. A financial crisis would be dramatically positive for the gold price.
  
  Our 2008 year-average would be higher were we not a little concerned about how the market will handle a potential rise in the dollar versus the euro, if it came to that. Too much Fed focus on ‘inflation’ and not enough on ‘recession’ would also not benefit gold.
• Ross Norman Following the stonking 30% rise in 2007, we remain manifestly bullish for gold prices and forecast that the market is set for another bumper year in 2008. Many of the factors that have taken us to record highs are likely to remain in play, but more so: specifically, accelerating investment demand of gold ETFs, safe-haven buying on ongoing concerns about the stability of the economy – but perhaps most importantly, rising inflation. Geopolitical tension may ease with the departure of Bush from the White House, and indeed the dollar may have seen the largest part of its decline, which could mitigate things. However, with mine supply remaining static, central bank sales comparatively limited, and the demand side fundamentals looking positive, we believe further significant gains are afoot with jewellery demand providing a welcome drag on runaway prices.
• Ross Norman So often in the shadow of gold, silver has recorded impressive gains over the last four years. As primarily a by-product of base metals mining, it remains moderately price inelastic, and it can expect rising mine production based upon increases in production of the host metals, primarily copper. Silver’s price gains, however, can be attributed to solid demand-side investment, and that appetite looks set to continue in 2008 as the race between the old world and the emerging economies to corner the world’s natural resources intensifies… be it a mine or simply physical metal. The fly in the ointment may be the slowing global economy and, more so than in gold, this could signal a more modest increase than in former years.
• Ross Norman Platinum continues to benefit from a solid fundamental base. Inventories at the start of 2008 are low, and with the market expected to sustain a deficit between supply and demand over the year, prices can be expected to remain high. Whether there is sufficient power in the market to sustain platinum at levels much above 1,600 is open to doubt, however, especially as it is experiencing increasing challenges from palladium in the important demand sectors of jewellery and the automotive sector, notably in diesel, where until relatively recently it has been the only PGM in use. Mine supply is increasing, particularly in South Africa, but the market is not expected to move into a surplus until 2009, even if economic activity slows. Although there is frequent reference to the struggle being sustained by indigenous North American auto producers, the global automotive sector is relatively robust and will continue to underpin the market.
• Ross Norman The comparative non-performance of palladium prices is a surprise given the significant price differential to platinum. With many automakers able to switch between PGMs and with metals stocks tightening (albeit slowly), palladium looks ready to join the commodity bull run, if somewhat modestly. We are bullish for palladium in 2008 and expect the auto sector to continue to drive the market higher (pun intended) as palladium makes inroads (pun intended) into platinum usage on diesel catalytic converters.
• Rhona O’Connell The heady days at the start of 2008 have generated a euphoric response in the wider markets, with the result that forecasts of ever-rising prices are almost becoming self-fulfilling. There is a panoply of supportive factors in the market, but it is important also to remember that gold not only enjoys investment and speculative support, but also has an independent set of ‘traditional’ supply-demand fundamentals of its own. High and volatile prices have been undermining this balance, with physical demand filling in a number of price-responsive regions, notably the Indian Sub-Continent where demand has not only slowed but scrap is being returned. There is a risk that once the inflow of investor funds slows – or even reverses – then a price fall could be sharp.
  
  In early 2008 gold is benefiting from renewed dollar bearishness, inflationary fears in an increasing number of countries (although real interest rates are by no means all negative), geopolitical tensions and concerns over continued contagion form the credit market problems, plus a positive view overall with respect to the commodities sector. These are easily enough to propel prices through 900 and onwards towards 1,000, but any such challenge will be professionally driven. For a solid physical support base to develop gold needs to lose some of its speculative excess.
• Rhona O’Connell Silver’s fundamental background is less robust than that of gold and it, too, has been enjoying inflated prices that have been boosted by investment and speculative interest. The balance between traditional supply and industrial demand is likely to be in surplus during 2008, and this theoretically points to lower prices, but while gold remains buoyant, silver is likely to follow suit. It is a notoriously volatile metal, which tends to mean that speculators often trade it as a geared method of playing gold-price movements. Photographic demand continues to fall, although this is being offset by a proliferation of industrial uses; equally, however, mine supply is on the increase. When gold runs out of zip, then the silver market will be a very dangerous place to be.
• Rhona O’Connell Platinum continues to benefit from a solid fundamental base. Inventories at the start of 2008 are low, and with the market expected to sustain a deficit between supply and demand over the year, prices can be expected to remain high. Whether there is sufficient power in the market to sustain platinum at levels much above 1,600 is open to doubt, however, especially as it is experiencing increasing challenges from palladium in the important demand sectors of jewellery and the automotive sector, notably in diesel, where until relatively recently it has been the only PGM in use. Mine supply is increasing, particularly in South Africa, but the market is not expected to move into a surplus until 2009, even if economic activity slows. Although there is frequent reference to the struggle being sustained by indigenous North American auto producers, the global automotive sector is relatively robust and will continue to underpin the market.
• Rhona O’Connell Palladium continues to run a high inventory level, but the underlying fundamentals of the market are relatively strong. There is always a question mark as to whether Russia will be a supplier from its inventory, which has in the past helped to keep palladium price action reasonably muted, but the mood in the markets is such that a test of 400 cannot be ruled out. Industrial demand remains healthy, underpinned by the automotive sector, jewellery and electronics. In theory the high level of inventory should suggest that palladium would underperform platinum over the year, but palladium’s encroachment into platinum’s territory in the diesel sector suggests that it will remain competitive.
• Frederic Panizzutti In 2007, gold rose over 30%. From a less predictable scenario over the last 2 years, mainly due to geopolitical tensions, the market now shifted into a more rational and forecastable environment. The prevailing factors this year remain a weaker USD, the subprime crisis and further diversifications by both the official and private sectors. We expect the USD to weaken further on the back of slower growth and broader disinvestment out of the USD into assets which are negatively correlated to the USD and/or not sensitive to the performance of the US economy. The spreading impact of the subprime crisis remains a major concern and the collateral damages will unfortunately be far-reaching, spread globally and impact several sectors affecting global liquidity. Furthermore various central banks have expressed their intention to reduce some of their USD exposure and to consider an increase of their gold reserves. These factors, amongst others, should lead to additional capital inflow into gold as a safe haven. Several volatile trading sessions with erratic moves are ahead of us, and we would not be surprised to see gold moving briefly above the 1,000 level.
• Frederic Panizzutti With as little as 13.5% price performance in 2007, silver disappointed. We had expected silver to trade in the shadow of gold and to close the year substantially higher. But the physical surplus and an absence of substantial investment interest stopped silver from trading higher. The risk for renewed supply/demand imbalances in 2008 will probably prevent silver from moving significantly higher. Nevertheless, the expected pressure on the USD and the positive influences from the other precious metals might artificially help silver to trade toward 19. But the upside trend should remain limited due to the substantial physical availability. Rallies might be countered by sharp profit takings. We expect silver throughout 2008 to shift from active and volatile trading into apathetic sessions.
• Frederic Panizzutti Platinum rose around 34% in 2007 and again is set to challenge the other precious metals in 2008. The very fragile and unstable equilibrium in its tight supply-demand balance will remain a key concern and probably the underlying reason for several rallies over the course of the year. Increased appetite for ETFs will further tighten the market and emphasize the risk for periods of dry supply into possibly increasing demand in the Asian region; the possibility of a weaker USD is likely to be another supportive factor. Any rally would trigger a consistent but short-lived increase in lending rates due to tighter short-term metal availability. Volatility and erratic trading will be the main concerns and physical squeezes the name of the game.
• Frederic Panizzutti Palladium has been the poorest performer in the group with as little as a +9.6% movement in 2007. We are not expecting a very different pattern next year. More than sufficient physical metal availability will continue to cap the upsides. Still, as a matter of diversification, palladium might profit from marginal money inflow when bound to the other metals in a basket. We expect palladium to trade, as in 2007, in a narrow band and to provide only little surprise to the market.
• Rupert Prest The outlook for platinum remains strong, with any dampening in demand in the industrial/motor sector and jewellery sector caused by a global slowdown offset by strong investor demand. We expect the funds to have a healthy appetite for commodities, certainly for the first 6 months of 2008, and Chinese demand to remain robust. With the expectation for higher prices across the metals complex, a significant move into uncharted territory is very much on the cards and we forecast a high average for the year at 1,525.
• Rupert Prest Palladium, though fundamentally less attractive than platinum, is expected to coattail higher and try to push through 400. The oversupply will surely weigh heavily on any rally, but investor demand should be strong under 350.
• John Reade Speculative and investment demand lifted gold to new all-time highs early in 2008. At 870, we consider gold to be about 150-200 above fair value, by which we mean the level at which jewellery demand would support – and scrap supply would stop pressuring – the gold price. This does not mean that gold will immediately fall, but it does make the metal vulnerable to a sharp correction. We do expect further gains in the first half of the year, driven by more safe-haven buying and dollar weakness as the credit crunch triggers a US and global growth slowdown. A large producer buy-back also could play a role in pushing gold to its high, although the number of potential candidates is decreasing. But we expect gold to trade lower in the second half of 2008 as dollar strength, at least against European currencies, trims some of its gains. Keep an eye on Shanghai futures exchange turnover.
• John Reade Silver has fallen from favour over the past year, at least relative to gold, as investors have given up hope of a physical squeeze in silver. This had been expected to be triggered by inflows into exchange-traded funds, but the squeeze failed to materialise despite substantial inflows. Silver’s nasty habit of sharply underperforming gold when both metals correct is also deterring investors from holding this volatile metal. Silver mine supply, unlike that for gold, is increasing due to new primary and especially by-product output. Silver demand remains dogged by structural declines in imaging and has become overly dependent on industrial demand, likely to be a disadvantage as global economic growth slows. Finally, we see far less safe-haven buying of silver, not least because of onerous storage issues involved in holding relatively modest stashes of the metal. Keep an eye on the gold:silver ratio.
• John Reade Platinum has the best supply-and-demand fundamentals of all the metals we forecast, excepting perhaps rhodium. Although some platinum applications are sensitive to slowing global economic growth, many are not. Overall demand should hold up well in 2008, especially if Chinese appetite for platinum remains as undiminished as trading in the first few days of the year suggests it will. Supply is likely to disappoint again as South African miners struggle with technical, staffing, safety and bureaucratic issues. Platinum, like other precious metals, is vulnerable to speculative long liquidation, and any correction in gold in the second half of 2008 will drag platinum lower as well, although we expect platinum to be the best relative performer amongst the four precious metals this year. Keep an eye on ETF inflows and perovskites.
• John Reade Platinum’s ugly sister is unlikely to get an invitation to the party this year, and should continue to languish well below its all-time highs seen early in the decade. Investors should not, however, entirely lose hope. Once Russian stock sales end sometime in the not-too-distant future, and assuming that the metal’s special properties and jewellery allure continue to attract scientific investigation on the one hand and marketing efforts on the other, then this metal should eventually shrug off its decades of underperformance. Just don’t expect any sustained strength in 2008. Keep an eye on Chinese imports.
• Jeffrey Rhodes Gold posted a stunning performance in 2007, gaining 201, or 31% year on year with the average price rising by 15%, and early trading in 2008 has seen the yellow metal surge to a fresh all-time high of 891. The usual suspects of geopolitical tensions, rampant oil prices, and an ever-weaker dollar remain very much in play, but they have now been joined by concerns over the global banking system following last year’s subprime crisis, and the investment flows into gold have intensified. However gold has now entered the 7th year of its current bull market, a record bettered only during the period from 1973 to 1980, when gold rose from 65 to 850. Once that particular ‘bubble’ had burst, gold spent 20 years on the back foot as it retraced towards 250, and my concern remains ‘what happens when this bull run reverses?", because financial history always repeats itself. I can see the current momentum taking gold as high as 975 in the first half of 2008. However, with the prospect of the US Presidential election in November likely to give a boost to the ailing greenback, and physical demand for gold jewellery described as ‘depressed at best’, I can see a reversal in sentiment in mid-year.
• Jeffrey Rhodes While silver also posted decent gains in 2007, rising 14% year on year and 16% on average, it clearly lagged gold as concerns over the impact of rising energy costs on global economic activity and demand weighed on the ‘most industrial precious metal’. With talk of economic slowdown, and even recession in the US, silver could be caught between a strong gold price and (possibly) weaker base metals. However, as it is less than one third of its way towards the all-time record high of 50 seen in January 1980, as opposed to gold and platinum that have both posted records highs in January, silver has a lot of upside, with the possibility of a spike above 20. However, it also remains the most volatile metal in the sector, with price prediction a less-than-exact science.
• Daniel Smith We are forecasting that the upward momentum in platinum prices carries on through this year. Part of the reason for this ongoing tightness is that consumption growth has consistently outpaced supply. The key driver of demand is the automotive sector, accounting for 61% of consumption last year. Prospects for this sector look rosy, given increasingly stringent environmental legislation. Furthermore, autocatalyst demand is being helped by expansions in the gasoline vehicle fleet in Asia as well as solid sales of diesel vehicles in Europe. These factors should more than offset thrifting and weak vehicle sales in North America.
  
  Supply developments are also helping. Supply fell by 2% in 2007 due to lower output from both of the major producing countries – South Africa and Russia. Looking ahead, high platinum prices, capacity expansions and improved recoveries should all result in a pick-up in global supply and we are forecasting 2% growth in 2008, although this will not be enough to close the gap on demand.
  
  Adding to this physical tightness, platinum is also benefiting from the continued investor interest in commodities as an asset class. Figures from London-listed ETF Securities show that physical holdings for its platinum ETF, which was launched in April 2007, stood at 140,000 ounces towards the end of the year.
• James Steel Gold is a traditional safe haven in times of financial, economic and even geopolitical stress. The ongoing crisis in the credit market and its impact on the broader financial market has increased investor uncertainty, and is in our view a major driver of the gold rally: for as long as the credit crisis continues, gold is likely to be well bid. In an effort to combat the credit crunch and ward off a possible recession, the Fed, as noted by HSBC’s macro economics team, may lower the Fed Funds target to 3%. This should support gold in the near term. Higher commodity prices are also supportive of gold. Potential developments in the bullion and currency market may weigh on gold later in the year. A recovery in the US dollar, which HSBC currency analysts believe possible, and contracting jewellery demand in the emerging world and an increase in scrap may weaken prices later in the year.
• James Steel Silver prices will largely track gold but, unlike gold, silver mine output will likely rise over 20mn oz based on mine projections. The increase will mostly likely come from Latin America. Jewellery demand also began to weaken in 2007 due to high prices, a trend we believe may continue into 2008. Despite expectations of a production/consumption surplus, we expect silver to follow gold with a lag.
• James Steel Platinum continues to have in our view the most bullish fundamentals of the precious metals complex. Mine supply, although expanding, is growing at a much slower pace than that projected by the large South African producers. This is due primarily to technical issues and safety-related shutdowns. Despite substitution with palladium and thrifting by autocatalyst manufacturers, demand from the automotive sector continues to grow robustly. Jewellery demand, we believe, has softened as result of high prices, but overall we now expect supply/demand balances to remain tight in 2008. Although we are projecting a small production/consumption surplus for 2008 of less than 200,000 oz, we do not believe it will be sufficient to impede further price gains.
• James Steel Although demand from the automotive sector remains robust, we expect the palladium market to remain in surplus for this year as a result of steady Russian stockpile sales. The price of palladium, in our view, has been largely supported by the strength in the platinum price. Should the commodity markets soften, we expect that palladium would show the first signs of weakness. However, due to recent price appreciation in platinum, palladium will be higher than its inherent fundamentals would suggest.
• Glyn Stevens Solid industrial demand, likely production problems, increasing investment opportunities and global unrest all point to 2,000 platinum. As crazy as this may seem, and however brief it may last, this represents less than a 35% increase in price from the year’s opening, a move certainly not unprecedented in commodities recently. Reality may then dawn, perhaps substitution will set in wherever possible, and the rally may fizzle out. Recession may even bite in the developed nations of the world – hence there could be a retracement in price in the latter stages of 2008.
• Glyn Stevens The main thing going for palladium is the meteoric rise in platinum. This will both encourage substitution by industrials and buying of the "cheapest" pgm by speculators. However, fundamentals remain very poor. Hence any spike in price should be short lived.
• Bob Takai The Fed’s dilemma remains the equally unpleasant choice of recession or inflation. Until the devastating effects of the sub-prime crisis work their way through the world’s financial system, the Fed will continue to cut rates, risking inflation and accepting a weaker dollar. Commodity prices will continue to be the principal beneficiary of this confluence of events.
  
  As an asset class we remain bullish for commodities, in particular gold, oil and the agricultural sector. Strong institutional demand from index and fund investors will underpin investment in gold and oil as the combined effects of political uncertainty, terrorist activity and the potential for supply disruptions plague these markets. The agricultural sector will continue to react positively to the effects of grain shortages brought about through demand from China as well as the diversion of grain feed stocks for the production of ethanol.
  
  The threat of a global recession will increase if the US does not act prudently and convincingly to restore confidence in its financial house. In that event, extreme sell-offs in all dollar-denominated assets will occur, and 2008 will be remembered as the most volatile year in a decade.
• Edel Tully The rush to own gold in the current climate and the belief that the bull run will be long term in nature is perfectly captured by the depth of investor interest as reflected in the weekly exchange participation and ETF accumulation. It will be impossible to remove speculative activity from the gold price equation of 2008. However, it is essential to throw in a weak USD, a mounting oil price, falling interest rates, rising inflation, and credit market turmoil into the price mix. When occurring in tandem, these are powerful forces for considerably higher moves in the yellow metal. Persistent sharp volatility movements will act to significantly dampen physical demand, but restricted mine supply along with further producer buy-backs will continue to offer support. The health of the global financial economy, in addition to the direction and the pace of USD movements against the EUR, will be one of the major drivers in the sustainability of this rally in 2008.
• Edel Tully Our over-riding belief is that silver will continue to play sideshow against gold, and while the metal may appreciate to 18 this year, gold will retain the title of chief gainer. Its fundamental attributes will not be the prime driver of price and rather contagion from the precious metals complex will greatly influence silver’s price path. Sombre physical demand will act to put some constraint on price rallies. Greater investor participation in commodities, along with a supportive macroeconomic environment fueling the precious metal group, will be the key ingredients for silver to trend higher, but not at meteoric or parabolic levels.
• Edel Tully The surge in speculative activity and the inherent fundamental market tightness means that a backwardation environment for platinum is never far away. Platinum ETF investors firmly signalled their bullish attitude in 2007, and their participation could more than double in the year ahead. China, as the chief global jewellery purchaser, remains price insensitive to elevated movements of platinum into this region observed from official import data and notably higher turnover on the Shanghai Gold Exchange. However, demand from other regions is firmly price elastic and jewellery off-take will suffer. Diesel penetration in the EU market continues to grow at the expense of gasoline and the US is slowly waving the flag for future diesel adoption; however, thrifting and substitution will remain commonplace. The continuing safety drive by South African unions is likely to escalate in 2008, thereby contributing to an already-challenged supply environment and an elevated platinum price.
• Edel Tully Palladium will remain very much in platinum’s shadow, and the metal’s preference to linger largely in a sideways trading pattern for extended periods will continue. Even if speculative participation remains considerable, the large surplus in the market will be a sufficient cap against palladium reaching 500 in 2008. Fast-growing auto markets such as China, Russia and Eastern Europe will add firm support. However, weighing down this escalation will be pressurised US demand and the danger of ripple effects in a borderless global economy. Furthermore, the gasoline-dominated US market is moving increasingly towards compact vehicles, with smaller engines and, in turn, lower PGM requirements. The wildcard in the mix could have been the actions of Russian stock flows. However, we do not believe that this will be a factor for 2008, and is more likely to manifest towards the close of the decade.
• Trevor Turnbull The US dollar and the US economy continue to disappoint and concern investors creating strong support for gold. A particularly bullish scenario could develop with the inflation fears that are emerging globally on the back of the potential for prolonged 100/bbl oil prices. This could lead to a breakout across several major currencies and drive gold to new record highs. In 2008, volatility could return in a fashion similar to last year, with liquidity-driven events if financial crises disrupt investor confidence.
  
  Supply fundamentals are strong, with mine output flat to down and potential new projects increasingly likely to be delayed as they undergo rigorous re-examination in the wake of high-profile capital costs increases. In 2008, we can look forward again to significant demand in the form of de-hedging as AngloGold Ashanti eliminates most if not all of its 10.5-million-oz hedge book.
• Trevor Turnbull Industrial use for silver accounts for nearly half of demand and implies a negative impact from an economic slowdown and fewer electronics purchases. The good news is substitution for silver is low due to relative price inelasticity. In fact, silver does benefit from environmental concerns that have caused lead to be phased out of products and materials such as solder. Silver as a substitute is finding more applications that can help offset slackening demand.
  
  Mine supply of silver as a by-product is growing with the surge in base metal production. Some of the new mines coming on stream are backfilling lost output, but the net result is more silver, especially from China, where lead and zinc production are increasing.
  
  We feel silver may struggle to maintain a 50:1 or lower price ratio with gold. However, we do not discount the ‘silver bugs’ that have an inherent affinity for the metal as an investment.
• Matthew Turner It is a relief for the gold market that the time since the metal’s all-time price high is now measured in weeks, rather than decades. Now the big question is at what price this bull market will top out, and what happens then.
  
  Much will depend on both the severity of the expected economic slowdown and how gold reacts. The subprime crisis, which has led to a collapse in trust of financial institutions, has certainly been helpful. Such a crisis is what was always said to be required for gold to come in to its own, and that the metal has shown some of its fabled ‘safe-haven’ status is bullish in itself.
  
  Gold’s physical supply and demand situation is not so solid, particularly as high prices take their toll on jewellery demand, although new supply will again be constrained by a last round of major dehedging.
  
  The risk is that the US economy fares much better than expected and the dollar stages a recovery. Such an unexpected outcome would be highly negative for gold, given expectations, but probably unlikely to make itself felt before mid 2009.
• Matthew Turner Platinum could be seen as a prime candidate for falling in price if recession grips the US and Europe. The metal depends heavily on jewellery and car sales, both areas of consumer spending highly sensitive to economic fortunes. At 1,500, furthermore, it is so expensive that substitution for palladium in autocatalysts or white gold in jewellery makes much more sense. Yet we can’t help remaining mildly optimistic. On the supply side production in South Africa and Zimbabwe remains fraught with difficulties, whilst autocatalyst recycling volumes are unlikely to rise sharply. On the demand side falling car sales will harm platinum, but the high oil price surely accelerates the adoption of diesel-engined vehicles worldwide. But don’t expect huge gains in price, as much of the bullish factors have already been priced in.
• Matthew Turner Is this the year of palladium? Probably not. The metal remains oversupplied, and the great hope – jewellery demand – is slipping from unproven to disproven. Autocatalyst demand could suffer from a decline in US car sales and a slow switch to diesel (although that will intensify efforts to make the metal applicable to diesel cars), whilst Asian car sales growth could slow. The metal’s initial reaction to the subprime crisis shows how dependent it has become on speculative investment, and how vulnerable it is to any withdrawal of that investment on a flight to safety. The price is unlikely to fall away (unless there is a severe financial or economic crisis) given it’s not risen that far, and as long as commodities in general and platinum in particular remain strong. A more bullish case will require signs that Russian stock sales have come to an end.
• Bhargava Vaidya Gold will remain volatile in 2008. A weak US dollar and forecasts of interest-rate cuts will drive the price higher. Geopolitical pressures in the Middle East and terrorist threats will also keep people interested in gold.
  
  All of this will contribute to higher prices. The only negative factor is that physical demand for jewellery will reduce at higher levels.
• Bhargava Vaidya Silver’s relationship with gold and base metals like copper will also reflect a higher and volatile price run; however, given that the main supply source of the metal is as a by-product will cap the price.
• Alexander Zumpfe Gold will continue to be well supported over the course of 2008 with investors on the hunt for alternatives. Equity markets appear vulnerable to a correction with an economic slowdown around the corner and the credit crisis looking far from over yet. With Fed rate cuts most likely in the months ahead, interest-paying investments also become less attractive.
  
  However, we do not expect the metal to race to the forecast high of 975 in a straight line. Investor demand flooded the market in the first days of the year, bringing speculative longs to new all-time highs. It is worth noting that the opening of gold futures trading in Shanghai in January adds further interest from the investment community. This leaves the metal vulnerable to a correction – a volatile picture that should persist over coming months. That in turn broadens our expected trading range. While the dominant group will be investors and speculators, the dominating force behind the moves again will be the US dollar. It can’t be ruled out that the greenback will test fresh lows if the US economy really goes into recession. Our bullish gold price view is supported by a muted supply picture, with production likely to remain stable at best if not decrease over coming years. Additionally, we are sceptical that central bank gold sales will reach the yearly limit as agreed to in the Central Bank Gold Agreement.
• Alexander Zumpfe While a possible economic slowdown might be supportive for gold, the picture is less rosy for silver. Though some initial demand is likely to occur in line with a strong gold price, the supply side will limit the upside potential. This comes together with the apparently unlimited liquidity in the OTC market, which even persisted during previous months when ETF inflows were still remarkable high. Premiums for physical silver have decreased further recently, which is last but not least due to an increase of available recycled material. On the demand side, new industrial applications are compensating for part of this supply. Despite their promising growth rates, these new applications will nonetheless not take over the role of shrinking demand factors, such as the photographic industry, in the short term. An increasingly likely economic slowdown would further attenuate industrial demand.
• Alexander Zumpfe Despite trading around new all-time highs, there is not much that could hinder platinum from reaching a new record. If anything, there is the danger that a US recession and a slowdown in the overall global economy might weigh on industrial demand. Beside this there is much that speaks for higher prices: first, there is Chinese demand, which exists across nearly all sectors – to name just two, the jewellery and car industries. The latter will remain a dominating factor. Although parts of the platinum contained in diesel catalysts can be replaced by cheaper palladium, this process is limited to 25-30%. Diesel cars are expected to become more popular in countries such as the US and Japan in the mid-term. Together with stricter emission regulations – which require more metal in catalysts – the future for platinum remains bright. Another factor is investor demand, which became even more pivotal after the launch of two ETFs. We expect this trend to continue. Third, the supply side has recently become increasingly vulnerable to interruptions due to strikes and accidents. Because of organisational and political uncertainties, junior mine production is looking less promising than expected in previous months.
  
  Last but not least, it is worth mentioning that Chinese consumers pretty much ignored new price records. In contrast to earlier rallies, we witnessed remarkable demand from the Shanghai Gold Exchange and it looks like people are increasingly getting used to high prices with growing wealth. This price inelasticity might give an additional boost – or at least good support – to platinum.
• Alexander Zumpfe Looking at stocks in Zurich vaults, palladium remains unchanged in an oversupplied situation. However, this is only one part of the story. Due to high physical demand, we recently witnessed a shortage of available sponge, with premiums going up accordingly, pointing to good industrial offtake from the chemical and car industries.
  
  Though it is difficult to estimate the extent of Russian stocks, we do not consider the overall muted-to-bearish fundamental situation as being over for the time being, especially since a substantial amount of metal is likely to become available out of auto catalyst recycling over the coming years.
  
  Nevertheless, we expect the demand side to provide some support in 2008. First of all there is the car industry again: though a huge part of required metal is sourced out of the recycling process, growing demand out of the Asian automobile industry should generate net demand. Together with an again-promising demand trend from of the electronic industry and the bullish impetus from a soaring platinum price, we do not rule out that palladium will finally deliver a strong performance – even compared to other precious metals.

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