Gold has had a strong performance so far this year, but it is unlikely that this will continue. Granted, jewellery demand will rise this year, we expect it to rise strongly by around 10%, mainly driven by solid Chinese gold demand and some recovery in Indian gold demand, because we remain optimistic on both economies. But gold import restrictions in India will remain in place in our view. However, the rise in jewellery demand will be more than offset by another negative year for investment demand. Not only we expect a further reduction in both total ETF positions and futures market positions, but also lower demand for bars & coins. Our base scenario is for US growth momentum to gain, the US dollar to rally and investor sentiment to remain positive despite the upward adjustment in expectations about the Fed’s future path of interest rates. Financial markets are significantly underestimating the likely upside for US rates next year. We therefore we see upside for short rate expectations and the dollar in coming months. Finally, other investment will become more attractive.
Platinum and Palladium
Palladium has strongly outperformed other precious metals this year. Fundamentals, such as supply shortage and improvement in the global economic outlook, remain strong and they will likely remain supportive this year and next year. However, investor positions are overcrowded. Investors have been confident, because of the supply shortage, improvement in demand outlook, mining companies being in a rationalization process and relative price resilience. Every sell-off in prices appears to be met with strong demand. We continue to believe that the position overhang is a serious risk for prices. Even if positions were to be reduced, our forecasts appear to be out of reach. Therefore, we have adjusted our forecasts to reflect a less negative picture. However, we continue to expect that prices will go lower, triggered by a sell-off in gold.