What can we expect from precious metals in 2019?

This year, the prices of gold and silver will continue to rise, while the prices of platinum and palladium are likely to remain under pressure. That's what research agency writes Metals Focus in a new report on precious metals. Metals Focus analysts expect gold to benefit from a flight to safe havens this year.

In addition, silver will do even better, because the silver market is much smaller than the gold market. Metals Focus has lower expectations for platinum and palladium this year. Platinum's fundamentals are still unfavorable, while palladium is already very highly valued and thus can expect a small correction.

Gold

Investors are concerned about the growth of the global economy and are seeking refuge in safe havens such as government bonds and precious metals. According to Metals Focus, these concerns will continue in 2019, leading to the Gold price can rise further. However, the upside potential is limited, because the dollar will also strengthen at the same time. Central banks may also reduce their pace of rate hikes to reassure financial markets. Metals Focus expects the gold price to rise to the level of early 2013.

Silver

The price of silver has fallen by about 10% in dollar terms over the past year. As a result, the precious metal did much worse than gold. This is also reflected in the ratio to gold, which rose last year to its highest level since 1992. Investors showed less interest in silver and several mints reduced their production of Silver Coins. Lower sales of investment silver accounted for about a third of the global surplus of 54 million troy ounces in 2018.

This negative sentiment presents opportunities for investors, according to analysts at Metals Focus. They expect a sharp increase in the Silver price in 2019, as silver will benefit from a rise in the price of gold. And because the silver market is much smaller than the gold market, the price of the grey precious metal could rise much faster. The precious metal is still relatively cheap compared to gold and can therefore catch up.

Platinum

The price of platinum has fallen by about 10% in the past year. The precious metal is under pressure due to a structural surplus and declining industrial demand. Platinum is mainly used for catalytic converters for diesel cars, which are becoming less popular due to stricter environmental requirements. In the European market, the market share of diesel cars fell to 34% in November, compared to 40% at the beginning of 2018. Due to a decrease in the demand for platinum, there was a surplus of 360,000 troy ounces in 2018.

Since 2010, above-ground platinum stocks have risen from 6.9 to 8.7 million troy ounces. Due to the surplus in the platinum market, the upside potential for this precious metal is limited. Metals Focus expects platinum to underperform gold this year and that there is little chance that the price will exceed $1,000 per troy ounce this year.

Palladium

The fundamentals of palladium look a lot more favorable, according to Metals Focus. This precious metal is mainly used in catalytic converters of gasoline cars and benefits from an increased demand for these types of cars with lower emissions. In recent years, there has been a structural shortage of palladium, with the result that above-ground reserves are decreasing. Whereas in 2010 there was 24 months of available above-ground stock, last year it was only 15 months.

Despite the positive fundamentals, the research firm does not expect a significant price increase in the short term. That's because the price of the precious metal has already risen sharply last year and the outlook for the economy is deteriorating. The latter could put pressure on car sales, which also reduces demand for palladium. Nevertheless, there is likely to be a shortage again this year, which could cause the price to be higher at the end of the year.

Stocks of precious metals and price developments (Source: Metals Focus)