Precious Metals Price Outlook Economic Forecast

Precious Metals Price Outlook

Less positive outlook driven by U.S. monetary policy

Looking at 2017, precious metals prices are expected to perform poorly despite the many challenging events that could boost demand for safe haven assets. Precious metal prices are projected to decline 1.4% year-on-year in Q4 2017, mainly due to expected lower gold prices. Silver prices are seen rising mildly in Q4 2017, but its performance is expected to be poor, while palladium and platinum are forecast to end the year on a good note.

Precious metal prices, in particular gold and silver, experienced a rollercoaster ride in 2016, affected mainly by the events that shocked the world last year. Prices peaked in the summer of 2016 following the Brexit vote, but have since fallen in response to higher U.S. interest rates and a strong U.S. dollar. As expected, the U.S. Federal Reserve increased interest rates toward the end of 2016, with further rate increases expected this year depending on economic and financial conditions in that country. Physical demand for gold, platinum and silver was also weak last year, particularly in the world’s two largest consumers, China and India, given the metals’ elevated prices. Platinum physical demand, in particular, has been affected by the Volkswagen diesel emissions scandal, as the metal is mostly used in diesel catalysts.

Although upside risks to the outlook for precious metals are expected to come from political events and geopolitical tensions, strong physical demand from China and India, and mine supply shortfalls, prospects for the metals are less optimistic and will mostly be driven by U.S. monetary policy and its impact on the U.S. dollar’s performance. Traditionally, gold has performed well within U.S. hiking cycles as the yellow metal has always been seen as a hedge against inflation. However, prospects for higher interest rates in the world’s largest economy—which is close to enjoying full employment—will likely strengthen the U.S. dollar and hence affect investment demand for precious metals, particularly for gold and silver. Although investor demand for platinum will likely experience the same consequences as with gold and silver, platinum prices will benefit from stronger physical demand, given a tighter supply of the metal. 

Precious Metals Historical Price Data

2012  2013  2014  2015  2016  
Gold1668.69  1410.71  1265.83  1159.8  1248.54  
Silver31.14  23.82  19.07  15.71  17.15  
Palladium643.47  725  803.44  690.55  614.03  
Platinum1549.48  1485.41  1383.61  1051.85  987.37  

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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