Peter Fertig

Gold traded last year well within the expected range and the new record high even exceeded slightly the predicted high. In 2024, gold has the potential to trade even slightly higher. The major central banks remain the decisive factor. On the one hand, they are the dominant institutions for setting short-term interest rates and thus for the opportunity costs for holding gold compared to other assets.

However, their actions and words also have a stronger influence on the US dollar. While the Fed as well as the ECB are expected to cut interest rates during 2024, financial markets might get surprised from both. The markets are far ahead of the curve with respect to Fed rate cuts. The dot-charts provide a good guidance, but markets bet that the US central bank will cut the Fed Funds target rate twice as much as the dot-charts indicate. Furthermore, the first cut is already priced in for the March FOMC Meeting. On the other hand, inflation is likely to come down faster in the Eurozone during the first quarter of 2024. The PMIs are far below the crucial threshold. Thus, there is a good chance that the ECB will lower its key interest rates before the Fed, which would strengthen the US dollar and weigh on gold.

Last year, silver was not the more volatile precious metal compared to gold. The industrial use capped the upside. The industrial sector disappointed expectations for major economies, primarily in China. However, as the central banks are expected to ease monetary policy during the course of the year, not only gold, but also silver should profit from lower opportunity costs. In addition, economic activity should also improve and investments in renewable energy are positive for industrial silver demand. In that case, silver should also record higher inflows into ETFs holding the metal.

Besides the movements of the US dollar, the demand from the automotive sector remains a crucial factor for the PGMs. Last year, platinum was expected to remain well supported in the short run, as the production of cars with a combustion engine still dominates. In the first half, this was certainly the case. But in the second six months of 2023, platinum demand was weak and prices eased.

Business expectations in the German car industry are at their lowest point since October 2022. In China, the association of automobile manufacturers does not provide data on car production and sales after August last year on its English website. This points to low demand for new cars, even those with combustion engines. In addition, e-vehicles got more attractive again as energy prices came down heavily. Thus, prices are more likely to remain in a trading range similar to the one in 2023.

Palladium was expected to trade lower on average last year compared to 2022. That was the case. But the expected recovery did not materialise. Instead, palladium continued the decline throughout the year and only stabilised in the final quarter. The car industry did not provide the expected support to push prices higher. The demand from this sector could remain subdued during the first half. However, with central banks lowering interest rates, new car sales are likely to recover. Thus, a stabilisation appears the most likely scenario, but in 2024, the average price is probably again lower compared to the previous year.