BOSTON – (Kitco News) – Gold and palladium are the darlings of the precious-metals sector, but one analyst is paying more attention to dark horses silver and platinum.
In an interview with Kitco News during the London Bullion Market Association annual conference,
Johann Wiebe, lead precious metals analyst at GFMS, Refinitiv, formerly the Thomson Reuters Financial and Risk Unit, said that while gold and palladium still have momentum to push higher in the short term, long term he sees more value in silver and platinum.
“Silver and platinum don’t look great right now, but I think their sell-off has been overdone,” he said. “I think we are just seeing silver lag the gold market but it can catch up fairly quickly.”
For 2019, Wiebe said that he sees gold prices averaging the year around $1,270 an ounce and silver prices averaging between $15.50 and $16 an ounce.
Wiebe said that gold can continue to push higher as the speculative market rebalances and bearish investors cover their short positions. He noted that there is a high correlation between the gold price and net-speculative positioning.
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Chart courtsey of GFMS, Refinitiv
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Global economic risks can also continue to support higher prices, he added.
However, he also said that it is difficult to get excited about gold since the Federal Reserve is expected to raise interest rates in December and once a quarter through next year.
“The U.S. economy is holding up fairly well and the current interest-rate hike cycle will make it difficult for gold to continue to rise,” he said.
Wiebe said that the European diesel scandal will continue to support palladium in the near term, pushing prices to new records; however, he also sees a limit to how far prices can rise.
“I think prices will eventually be capped because there will be some switching in the auto market,” he said. “It’s expensive to switch palladium to platinum but it makes sense if the discounts are large enough.”
The primary industrial use for palladium and platinum is catalytic converters for automobiles. Historically, palladium was cheaper, thus used for gasoline-powered cars. Platinum was more expensive but was required for diesel-powered vehicles.
Meanwhile, Wiebe said that he thinks it’s only a matter of time before silver prices push higher since the market has significant industrial demand.
Jack Dempsey
President, 401goldconsultants.com