Precious Metals Monthly – Decoupling next year

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Gold: Lower prices in 2014 and 2015

Gold is down 25% year-to-date and the end of the correction is not yet in sight in our view. We expect investment demand to be in the driver’s seat and position liquidation to continue in 2014 and 2015. More attractive returns on other investments, outlook for lower prices, an environment of low inflation risk and positive investor appetite will result in investors reducing gold positions. Indian’s jewellery demand will likely remain weak. We expect Chinese jewellery demand to increase modesty but it will unlikely compensate for India’s shortfall. We keep our year-end forecasts for 2014 and 2015 at USD 1,000 and 800 per ounce, respectively.

Silver, Platinum and Palladium: Lower prices in H1 2014 and a recovery thereafter

Silver has underperformed gold year-to-date and this will likely continue in the first half of 2014 driven by investor liquidation. Afterwards we expect silver to become cyclically driven by the upswings in industrial demand and to disconnect from gold prices. Palladium has outperformed all precious metals year-to-date, but it recently lost its cyclicality. We expect this loss of cyclicality to be temporary though. Platinum’s perceived safe-havens attributes are the result of negative gold sentiment spilling over to platinum. Autocatalyst demand expectations for both precious metals are in line with consensus, so they will unlikely push prices higher from current level. We see some modest upside for platinum jewellery demand in 2014 though. But investor liquidation will likely have a more substantial impact on prices in H1 2014, so on balance we expect them to go lower. Looking further forward, we expect platinum and palladium prices to recover and that they regain their cyclicality.