ABN Amro: "Precious metals close to a bottom"

Precious metals prices are likely to bottom within a few weeks and then slowly start to return to an uptrend. That's what analyst Georgette Boele of ABN Amro writes in her latest report about precious metals. She expects gold, silver and platinum prices to recover somewhat later this year, but sees no reason to adjust her previous price targets.

Correlation yuan and gold

In the latest report, Georgette Boele writes that the Gold price and the prices of other precious metals will bottom for various reasons. Among other things, she refers to the strong correlation between gold and the yuan and expects the Chinese authorities to intervene in the event of a further depreciation of the currency.

This development will have a positive effect on the precious metal, as China is an important market for gold, silver and platinum. According to the ABN Amro analyst, the depreciation of the yuan over the past few months has played a crucial role in the negative price development of precious metals.

Strong correlation between yuan and gold (Source: ABN Amro, Bloomberg)

Dollar Strength

Another trend that has had a negative impact on precious metals in recent months has been the strong dollar. A strong dollar makes gold less attractive to U.S. investors, while putting pressure on the purchasing power of the inhabitants of emerging economies. According to Georgette Boele, the dollar will peak in the foreseeable future and then start to decline. This could also have a positive effect on the price of gold and the prices of other precious metals.

ABN Amro sees the large speculative short position in gold, silver and platinum as confirmation of the negative sentiment regarding precious metals. Because this short position is already so large and many traders have positioned themselves for a further price decline, there is a good chance that the bottom will soon be reached.

Speculative short position in gold and silver at record high (Source: ABN Amro, Bloomberg)

Short positions in platinum and palladium have also risen sharply (Source: ABN Amro, Bloomberg)

Is gold a safe haven?

The ongoing geopolitical tensions and the threat of a global trade war have not yet led to a flight to gold. In fact, the gold price has fallen further to $1,200 per troy ounce under pressure from the strong dollar. According to ABN Amro's analysts, the precious metal does not function as a safe haven at the moment, but it can behave as a safe haven when the dollar leaves room for it.

ABN Amro predicts a gold price of $1,300 per troy ounce and a silver price of $16.94 per troy ounce before the end of this year. For the end of next year, the bank expects a further increase to $1,400 and $20 per troy ounce respectively. Also for platinum and palladium the bank expects a recovery before the end of this year, to $928 and $1,064 per troy ounce, respectively. Platinum is currently even cheaper than palladium, but that situation will be reversed by the end of next year, according to ABN Amro.

ABN Amro foresees higher prices for precious metals (Source: ABN Amro)