Jonathan Butler

Gold will benefit from lower yields and a weaker dollar in 2024 as the US Federal Reserve is widely expected to dial back interest rates in response to moderating inflation and slower growth. This should help bullion reach record highs early in the year; however, if the actual pace and magnitude of rate cuts ends up undershooting expectations, then gold may be in for a downwards correction as the year progresses. Geopolitical tensions as well as speculation over the outcome of the US election should keep gold well supported as a risk hedge. Demand will be supplemented by ongoing purchases by central banks and, despite relatively high prices, professional and retail investors.

The three most important factors for gold: rate cuts, geopolitics, elections.

Interest rate cuts in the US and in other developed economies will help silver, but the extent to which they are already priced in brings the risk of a pullback if the Fed lowers rates less quickly than expected. Geopolitical and election tensions may also help support silver as a safe haven, with additional retail investment and ETF demand contributing to a further tightening of a market already expected to be in deficit.

As a largely industrial metal, silver will face headwinds from slower economic growth this year, though demand in the solar PV sector, telecoms and vehicle electrification will remain robust. A new US administration could herald a change in environmental priorities, with implications for growth in clean energy applications in the longer term.

Platinum supplies will be constrained by restructuring at South African and North American mining assets in the light of low prevailing PGM basket prices, plus there could be further disruption to refined metal output in the form of operational, labour and electricity supply issues. These factors bring upside risk to platinum prices and the threat of further market tightening.

Limited growth in car sales amid the threat of recession will restrict platinum demand in autocatalysts, while the incentive to substitute palladium with platinum may diminish as the metals approach price parity. Demand from other industrial applications will remain positive, with growth from a low base in the hydrogen industry. Investment demand will once again be the key factor in the expected market deficit, with lower interest rates helping stimulate new investment.

Palladium will continue to trade in a fairly wide range with a high degree of volatility caused by uncertainties on the primary supply side, including closures/rationalisations as well as operational stoppages. Supply of recycled material will be impacted by sluggish global new car sales and therefore less scrappage, though periods of high prices could bring more material back to refineries and move the market towards surplus.

Despite a mixed outlook for the automotive sector, expanding domestic car sales in China and growth in Chinese exports will help palladium demand. Substitution with platinum may ease as price parity approaches, and while electrification still presents a longer-term threat to palladium, its impact in 2024 may be lessened by growth in hybrid powertrains and challenges to pure battery electric vehicle adoption.