Strong so far but unlikely to continue
Precious metal prices have performed well so far this year and this has defied our expectations. However, the momentum in gold and silver prices has faded. This is because the recovery of the US dollar, better US data, an improvement in investor sentiment and lower inflation expectations have hurt gold prices. Silver prices have followed gold prices. Meanwhile, (geo) political developments in South Africa and Ukraine have provided support to platinum and palladium prices. More importantly, the fundamental picture is painting a more optimistic outlook for global car sales and industrial appliances. As a result, palladium and platinum prices have rallied substantially. However, we expect prices to come under pressure. Forces that had been supportive for prices will become more negative going forward. For example, we expect the dollar to rally, US economic data to steam ahead, US interest rate expectations to move higher, the impact of (geo) political uncertainties to wane and the strikes at South African mining companies to come to an end eventually. In the case of gold, it is unlikely that developments in India will come to a rescue. We judge that the Reserve Bank of India will remain vigilant on inflation and that the import restrictions will remain in place. Therefore, Indian gold demand could remain weak.