James Steel

Gold is likely to be supported by a cocktail of safe-haven and momentum purchases, spurred in part by policy and economic uncertainty. As the monetary easing cycle matures however, further cuts may be progressively less supportive. Mounting fiscal deficits are also likely to encourage gold demand. While sentiment remains bullish, high yields may also cap rallies. According to HSBC FX research, the USD is likely to rally modestly this year, and this could curb gold rallies. Trade and/or geopolitical risks – notably tariff risks – may be the principal supporting agents for gold. Central bank demand is likely to remain high, buoyed by geopolitical risks and dollar diversification but below peak 2022-23 levels. High prices are also notably eroding jewellery and coin and bar demand in key price-sensitive emerging and some OECD markets. Weaker physical demand leaves greater amounts of bullion to be absorbed by investors.

We are moderately positive on silver prices. While we anticipate a production/consumption deficit for this year, we also view above ground stocks as sufficient to finance any deficit. US Dollar gains as forecast by HSBC FX research and a slowing monetary easing cycle will help cap silver rallies as will moderate coin and bar demand. Industrial demand remains strong but can only carry silver only so far, as mine and recycling supply are rising. We believe the gravitational pull on silver of high gold prices will play a central, if not defining role in higher silver this year, but that rallies will be restrained.

Platinum’s underlying fundamentals still look price-supportive, but platinum has proved unable to sustain a rally above USD1,000/oz. It may rally more convincingly this year. Mine supply is moving lower due to low prices and restructuring, led by South Africa and North America. Capex reductions may inhibit output, even in the event of a rally. Auto demand is likely to edge higher based on ongoing substitution with palladium, despite platinum moving to a premium to palladium. Electric vehicle sales are likely to continue to win market share, but at a moderating rate. Jewellery demand is also likely to continue to rise, but from low levels. The outlook for other industrial demand sources appears mostly positive. We expect the market to swing into a wide structural deficit and support prices.

We are only mildly bullish on palladium’s price prospects for 2025. Declines in auto demand due to electric vehicle encroachment and substitution with platinum are eroding palladium’s principal source of demand, and we look for further declines in that regard this year. Other forms of industrial demand are not inspiring. Investor sentiment is less negative, however, as ETFs are accumulating metal once more. More importantly perhaps, massive net short positions on the CME of more than 1moz have been reduced, but are still high. Further short covering could boost prices. Russian supply is still reaching the market, but low prices are discouraging increases in mine output globally, including South Africa. North American output, in particular, is set to drop further. We look for the market to move from a wide to a narrower supply/demand deficit.