Forecasts for precious metal prices revised higher, but expected direction still lower
We have revised our forecasts for precious metals to reflect the recent changes in currency forecasts and the current market dynamics. A weaker US dollar, weaker US data, lower US Treasury yields and tensions between Ukraine and Russia have supported precious metals, in particular gold and silver. Concerns about supply from South Africa and Russia and better eurozone data have supported platinum and palladium. Going forward, we expect the US economy to accelerate, US Treasury yields and the US dollar to move higher and investor sentiment to improve. But the momentum of the US dollar rally will likely come later this year (in Q4) and accelerate in 2015. We judge that the overall size of the US Dollar rally will likely be lower than we initially had expected. If supply concerns in platinum and palladium ease as we expect, prices could drop sharply. Overall, we foresee lower prices in 2014 for all the precious metals and the pick-up in the more industrial precious metals to play out in 2015. However, the drop this year is expected to be more moderate than before for gold and platinum, and more significant for silver.