Bart Melek

We expect relatively range-bound markets in 2026, with upside risk in the early part of the year. The Fed-driven cost of carry reductions and balance sheet expansion, along with an expected yield curve steepening and potential concerns surrounding Fed independence, prompt us to say that the yellow metal will reach a new quarterly average record of $4,400/oz in the first six months of 2026. Considering the normal ebbs and flows, and rising geopolitical risk radiating from Venezuela and Iran, this suggests that the yellow metal could reach a trading high of $4,750+/oz. Looming concerns that the future Fed officials may not pursue a 2% inflation target, along with speculation the White House could aggressively lobby the U.S. central bank for lower rates at a time US debt is at record highs and growing, are very important reasons why we think the bullish gold trend will be here for much of the next year. These factors will continue to drive narratives surrounding US dollar debasement, de-dollarisation, and de-globalisation, which we think will keep official sector purchases robust, as central banks continue to diversify FX reserves. Meanwhile, the start of a broad movement away from the classic 60-40 portfolio structure to an asset mix which includes as much as a 25% commodity weighting, along with lower rates, should see investors increase their appetite for the yellow metal. However, a weakening economy, less inflation pressure, and an end to the easing cycle should also see the yellow metal consolidate below the highs in the latter part of the year.

The combination of strong ETF silver and call option purchases, still historically modest and relatively illiquid LBMA inventories, along with the need to hedge by market makers, has propelled silver to a new record near $83/oz mark in early-January. The outsized y/y price surge is occurring despite expectations of slightly lower industrial demand in 2026, and significantly higher LBMA inventories. Metal has flowed back to the global system, following a US tariff scare and the resulting squeeze months earlier. With tariffs unlikely to materialise this year, the white metal – which is trading deep in overbought territory – is projected to drop down into the mid-$40s sometime in 2026. With US tariffs not being an issue, excess metal located in the U.S. should continue to flow back into the LBMA system, which should provide liquidity and eliminate much of the current price premia. Weakish physical demand and a slowdown in investor interest could well be the trigger for the expected correction. However, a deep sustained rout is not expected. The silver market is still projected to be in a deficit, albeit lower than in the previous several years. This implies that above ground inventories will be required to achieve balance. If we add ETF demand, which we continue to see as robust this year, the silver market will continue to be very tight. Since the silver market will need to be balanced by investors, prices will be set well above the cost curve. This means that it is likely that the mid-$40s would be the lows and any additional interest by investors may see silver test recent record prices again.

Relatively steadfast demand associated with autocatalyst manufacturing, firm other industrial uptake, and weak supply side growth due to supressed South African production and weaker than expected recycled supply are set to create tight supply-demand fundamentals over the next several years. This, along with investor interest associated with US dollar debasement and interest in commodities as financial assets – and ongoing fear that Section 232 provisions will limit free flow of metal across the world and dwindle exchange inventories – have created very tight conditions on the front end. This has sent prices soaring to nearly $2,460/oz in late-2025. While our base case assumption is that US authorities choose not to enact tariffs or trade quotas on PGMs, we however see the threshold for an S232 recommendation affirming a threat to national security as relatively low. This implies that PGM tariffs or import quotas are still very much a risk, which will continue see a reduced availability of metal throughout the logistical system, limiting the market's ability to ease tight markets and soften high lease rates. But in the final analysis, we expect the metal to drop significantly from the late-year highs, as there are plenty of above ground inventories available once the market stops being preoccupied with Section 232 provision impacts.

The emergence of hybrid vehicles as a viable option to EVs, at a time of reduced government subsidies and less popular interest in environmental issues and tighter environment standards, have once again convinced markets that autocatalyst demand will increase over the next two years. This, along with depressed mining supply growth due to issues ranging from mine closures in South Africa, to a weak nickel market, to sanctions directed against Moscow, points to a primary deficit into 2027. We also suspect that recycled metal quantities will disappoint, as Americans keep used cars even after they purchase new ones. These fundamental factors in combination with concerns surrounding Section 232 have caused tightness in the palladium market, sending the metal surging to multi-year highs north of $1,940/oz in the final trading days of 2025. Just like in our assessment of the platinum market, we don’t expect S232 provisions to impact palladium. But the risk of that happening is indeed very real. As such, we expect overly elevated prices until that issue is resolved, and then a move down is projected. We judge that there are plenty of above ground stocks to fill the gap between primary supply and demand, which implies prices should move down from the late-2025 highs.