René Hochreiter

The rates cycle has topped in the US economy, but rates will only come down significantly if a recession looms. Even though we think the probability of a recession is low in the US in 2024 (an election year), the market may start to discount a recession in 2025 well before the year end. The ICE US Dollar Index is looking like forming a death cross at around 100, though the dollar will likely remain above this level as long as there is no recession, but again, dollar weakness may only start when the market starts discounting a recession, which may happen only in 2025. The gold price currently seems to be most influenced by the level of the US dollar, which could remain strong until rates weaken likely in H2 2024. During H1 2024, a low VIX, slowing US inflation, strengthening global economies and lower central bank purchases may put some pressure on the gold price.

Three most important factors affecting the gold price in 2024: the strength of the US dollar; US Treasury rates; geopolitical volatility.

Photovoltaic cell demand has risen around the world and we see this accelerating. Stock levels are up and therefore, despite good demand, silver prices will likely be flat from a market balance perspective. China is by far the biggest supplier of solar panels worldwide and demand from this quarter could double this year, consuming a possible 25% of total silver demand. It may already have made pre-purchases for this eventuality and demand could therefore be soft this year. As a precious metal, silver trades mostly in line with gold. With our cautious outlook for the gold price, though a little positive, we see silver as slightly underperforming it on supply and demand fundamentals.

Above-ground stock (AGS) levels remain at around 3Moz and, as such, there is unlikely to be a great change in prices in the next year at least. Even though South African production is likely to reduce because of uneconomic returns at certain mines that let their costs rise in the PGM boom of 2020 to late 2022, the AGS will satisfy demand for around three years of 1Moz shortfalls each. Substitution of Pt for Pd in the gasoline autocatalyst is no longer attractive as the prices of both metals converge to our forecast of ~$1,000/oz. Industrial demand will remain strong and platinum’s link to gold as a precious metal may see support from that quarter, but the overriding effect of the AGS will continue to limit strong advances in 2024.

As 90% of global palladium is produced as a by-product, even if the supply from the primary palladium producers, Stillwater Mine and Impala Canada, stops dead, the excess metal from Russia and South Africa will continue. This supply could be offset by firm autocatalyst demand from gasoline and hybrid cars as electric vehicle (EV) demand slows because of poor and recently abruptly falling sales of EVs globally. If EV sales do not recover, they will likely be replaced by ‘second prize’ hybrid cars, which are making Toyota, the great EV atheist, a fortune. Hybrids have a feel-good effect that attracts most humans who cannot afford EVs but who would still like to feel they are doing something for the environment. Hence, our relatively strong palladium price outlook for 2024.