Ross Norman

To know the future, you need to understand the past. But with little or no consensus as to why gold achieved a 27% gain in 2024, it makes it especially hard to gauge whether the trend will prevail; institutional (ETF) demand is flat, investment demand is lacklustre, while reported central bank demand is below the last two-year levels. Worst of all – and most perversely – gold's inverse correlation with many traditional macro drivers are out the window. Arguably, dollar strength and rising treasury yields may have only served to temper the rate of gold price increase, and hence them moving in parallel, suggesting to us that gold prices could accelerate again once the handbrake is off. This indicates a good underlying strength in the market. Likely the significant price rise was down to unreported central bank buying as sovereign nations de-dollarise, coupled with outlandish Asian OTC derivatives plays. If we are right, then we see no reason for a change in mode in 2025 and the gold rally remains intact, but perhaps a little less so. In 2025 the world may be more convivial, with US economic prospects and the dollar brightening, plus we may well see an echo to inflation as we did in the 1970s – but we think this matters less than it should. The high conviction buying looks set to remain, even if the motive remains a matter of debate. Three driving factors: 1. Chinese demand 2. Debt 3. Derivatives

Sometimes unkindly referred to as the 'Cinderella metal' (because it often misses the ball), silver did receive the memo in 2024 and posted a solid 33% gain on the year. Arguably though it should have done even better because, as gold's alter ego, it would typically be expected to significantly outperform during the seismic shift these metals are seeing. Worryingly, while industrial demand is strong and rising sharply, and with the market set for yet another year with a supply deficit, physical investment demand is declining – while institutional demand via the ETF is relatively lacklustre. Parallels with gold are clear. To mix metaphors, this is not yet a market firing on all cylinders. We estimate the supply deficit will be around 250 million ounces in 2025 satisfied by a commensurate drawdown in pipeline metal. That can only happen for so long. Well at least silver is not an 'ugly sister', but to be clear, nor is this yet a fairy tale story either. And like Cinderella’s popularity, or indeed an ‘all time high’ – that may take a little while.

If price predictions were only a matter of understanding fundamentals, then estimating supply deficits (or surpluses) then surely platinum would be the bookies’ favourite. But life is not like that. The good news is the broad economic outlook looks positive – although China is struggling just now – and with rising industrial production the broad demand for platinum can only rise. This provides a positive backdrop given the diverse range of applications where platinum is involved. More narrowly, last year's structural changes in the market in response to the low basket price for PGMs takes time to come through and these are now starting to bite. Additionally, we expect to see a rowing back in ambitions for net zero and, by extension, EV's with the Trump administration. This would be to platinum's advantage, conferring some resilience to ICE engines and, by extension, revving up sentiment. Meanwhile, the one-off releases of inventory seen in 2024, coupled with high recycling levels, suggests to us that the negative price impacts are behind us, setting the stage for a supply deficit of about 525koz. If we are right, then platinum is set for gains in 2025.

For palladium much of the bad news is already baked into the current price. Fundamentally, demand is declining but mine production has also eased, leaving the palladium market roughly in balance. That said, the smelter rebuild in Russia has been faster than anticipated and hence we expect total mine production to remain relatively static and not a fall as had previously been expected. Under the Trump administration the world will likely become more 'pro-oil' and less 'net zero', which could impact sentiment towards the PGMs positively even though actual demand will lag events. However, any significant price move to the upside will likely be muted given the large above ground stocks which could be readily deployed. After the heady days at a $3,400 level, palladium seems to have found a floor, and while although longer-term fundamentals look positive, they look markedly less bullish than platinum’s.