Joni Teves

We expect gold to rally as the market narrative shifts to recession risks, falling real rates and Fed policy easing. We think gold offers investors an attractive way to position as we reach the end of the Fed’s hiking cycle and growth concerns start to take over. Gold should scale new heights in 2024 and 2025, as the US economy falls into a recession, the Fed cuts rates, the US dollar weakens and real yields fall. Investors are not positioned for this, in our view, having unwound allocations as the global economy recovered from the COVID pandemic and as policymakers raised rates to fight inflation.

As the cycle matures and policy pivots, we expect attitudes towards gold to shift. We expect the move higher in gold to be driven by the re-emergence of strategic positioning from investors, underpinned by a continuation of strong official sector purchases and steady fundamental demand.

We think silver is well positioned to see decent price gains ahead, given it typically outperforms in an environment of rising gold prices and accommodative monetary policy. Silver’s tight market fundamentals and its long-term demand prospects from green technologies are likely to become more compelling for investors under this environment.

Although silver industrial demand faces downside risks against a weaker economic backdrop, we think any negative price impact will be outweighed by the lift from policy easing and spillover interest from gold. Given silver’s underperformance versus gold in 2023, it is likely to attract interest from investors who are looking for alternative ways to position for gold upside.

We expect the platinum market to continue tightening in the years ahead as the ongoing substitution away from palladium to platinum in autocatalysts continues. We think this should result in a gradual lift in prices, as the market works through existing inventories. As the price differential between platinum and palladium narrows, and eventually shifts into a premium in favour of platinum, there is a risk that the pace of substitution between the two metals could slow down in the medium term. That said, the bar is high for automakers to make the switch. Platinum supply should recover, but from a low base.

There is continued risk of supply shortfalls, which could trigger interim spikes in prices. South Africa, which accounts for around 70% of global platinum mine supply, continues to face challenges with power shortages and the potential for operational disappointments.

The long-term outlook for palladium remains bearish, with the ongoing transition towards BEVs continuing to weigh on the market. In spite of this, we think the sharp decline in 2023 was overdone, dominated by short positions. We think there is scope for an interim price recovery before the market resumes its journey lower.

Near-term upside price risks could come from mine supply disruptions amid ongoing uncertainties out of Russia, South Africa and North America. We expect the pace of the increase in BEV penetration rates to be slower than we previously expected.

China’s passenger vehicle inventories are now at normal levels and auto production growth in the coming quarters should support palladium demand. More stringent China 6B emissions legislation additionally implies higher palladium loadings. This could offer palladium temporary relief from the significant downward price pressure. However, it is unlikely to alter palladium’s long-term downward demand and price trajectory.