Precious Metals Price Outlook Economic Forecast

Precious Metals Price Outlook

Monetary policy is the main driver

Following a strong increase in Q3, prices for precious metals, led mainly by gold, slipped at the beginning of Q4. The strong performance in Q3 reflected strong investment demand and safe-haven buying against a backdrop of uncertainty in the global financial markets and low interest rates in the developed world. However, the drop in prices at the outset of Q4 was due to investors’ response to speculation that the European Central Bank (ECB) may modify its bond-buying program, which is set to expire in March next year, and to growing expectations that the U.S. Federal Reserve will raise interest rates in December.

Meanwhile, the gold-silver ratio has fallen from a 23-year high of over 80:1 in March to around 70:1 at the beginning of November, which reflects improved risk appetite for industrial commodities. Silver prices have rallied strongly, boosted by resurgent physical demand due to strong photovoltaic production in China. Prices for palladium and platinum appear to have bottomed out at the end of October as these metals found strong buying interest within a context of lower mine output.

Various key central bank meetings will occur in the final quarter of the year, which are likely to be crucial in terms of their impact on bond yields and prices for these metals, as will be the results of the U.S. presidential election. Analysts’ baseline scenario continues to be a Clinton victory. However, the former Secretary of State’s lead over Donald Trump has narrowed in recent days, which suggests a tighter result and, consequently, higher financial market volatility. According to analysts, a Clinton victory would boost risk appetite in the near term, because it maintains the status quo. The outlook for precious metals remains positive and analysts project that prices will increase 18.6% annually in Q4 2016. This month’s projection was revised down from the 20.8% increase that analysts had expected last month. 

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Precious Metals Historical Price Data

2011  2012  2013  2014  2015  
Gold1571.63  1668.69  1410.71  1265.83  1159.8  
Silver35.31  31.14  23.82  19.07  15.71  
Palladium732.93  643.47  725  803.44  690.55  
Platinum1719.18  1549.48  1485.41  1383.61  1051.85  

Note:
Gold prices in USD per troy ounce (toz).
Silver prices in USD per troy ounce (toz).
Palladium prices in USD per troy ounce (toz).
Platinum prices in USD per troy ounce (toz).
All prices are average of period (aop).

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Price forecasts and historical data for Energy, Metals and Agricultural Commodities

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