Peter Fertig

Gold proved again that it is not a good hedge against inflation. The reason is simple: as gold bears no interest, US money market rates and bond yields as well as the US dollar are the dominating factors. They had all been headwinds for gold last year. However, in this year, they turn into backwinds for gold prices, which are expected to gain considerably. The fed has not yet finished its job of hiking interest rates. But the indices of purchasing managers point to a cooling of the US economy. Thus, the FOMC is expected to reach the peak for the Fed Funds target rate rather soon. But in the eurozone, the ECB will probably be disappointed as the PMIs indicate a reduced probability for a recession in this year. Thus, the ECB most likely will get no support in combating inflation and will have to do its job alone. Therefore, interest rates will move in favour of the euro and weaken the US dollar. This should lead to further gains in gold after the positive start into the year 2023.

Also for silver, the main factor for the price trend in this year will be the US dollar, which is expected to weaken further after having reached the peak against the euro in September last year. The ECB will hike interest rates in 2023 more aggressively than the Fed as leading indicators point more and more towards avoiding a recession in the eurozone. And silver could get additional support from industrial demand. Especially, the environmental protection goods sector (solar panels, etc.) is expected to increase the demand for silver. Furthermore, a weaker US dollar should also increase the physical demand for silver from ETFs. Thus, a considerable rise of the average price seems to be the most likely scenario for this year.

Beside the movements of the US dollar, a crucial factor for the PGMs will be the demand from the automotive sector. Platinum is expected to remain well supported in the short run, as the production of cars with a combustion engine still dominates. The soaring costs for electricity in Europe were a blow to electric vehicles. Automobile production should increase in 2023, which implies a strongly rising demand for platinum in catalytic converters. Thus, a rising demand should absorb a major part of increasing platinum supply.

In 2022, palladium rallied again above $3,000 per ounce. Despite the price correcting considerably, palladium has not lost almost 50%, like in 2021. The major reason for its price soaring in early March last year were fears of sanctions against palladium from Nornickel. However, the Russian supplier could still get sanctioned depending on political developments. The expected rise of car sales and higher automobile production in this year should be supportive for palladium. As the price difference to platinum has narrowed, substituting palladium with platinum in catalytic converters for cars with a gasoline engine gets less attractive. Despite forecasting a recovery during 2023, palladium is expected to trade lower on average in this year compared to 2022.