All precious metals will see solid gains this year, but the likeliest best performers will be silver, followed by platinum and gold, said Frederic Panizzutti, managing director at MKS.
Despite a slower start to the year, gold is still on track to hit new all-time highs, Panizzutti told Kitco News last week.
“We expect gold to perform well. Gold to reach new highs at $2,300. All in, platinum, silver, and gold would be the top three performers,” he said. “Both silver and platinum have been lagging. This gap could attract some investment and speculative interest”.
Gold and silver’s gains will come irrespectively of the timing of the economic recovery.
“Silver has some catching up to do, and gold is in a perfect storm due to environment and appetite for diversification,” Panizzutti pointed out. “In the first half of the year, we expect silver to rise on the back of gold-silver ratio, which would result in speculative silver buying. Silver was in the shadow of gold, but we didn’t take full upside gain.”
Platinum and silver will also benefit from the recovering industrial demand this year.
“In the second half of the year, silver and platinum will advance on the back of increasing industrial demand, especially in Asia,” Panizzutti added.
Gold will see some repositioning in the market after U.S. President Joe Biden’s inauguration, which should benefit prices.
“The world was uncertain until the last minute. Investors liquidated positions and have been on the cautious side,” Panizzutti described. “The fact that the U.S. election has come to an end, the market will be able to concentrate on other factors like the fundamentals.”
Also, an economic slowdown in the U.S. during the first quarter mixed in with the likely lower corporate earnings results from 2020 and faster economic recovery elsewhere in the world could trigger a weaker U.S. dollar.
“We see outflows out of U.S. dollars and into regions where growth picks up sooner,” Panizzutti said.
Longer-term problems
The global economic recovery, which will kick-start this year, will not be as fast as expected, said Panizzutti, adding that it will likely take up to three years before the world can get back to pre-COVID levels.
“Vaccinations will help the world to recover, but the damage from 2020 won’t be erased very quickly. We expect gradual recovery and acceleration in the second half of the year,” he said. “We will remain in an environment where interest rates will be low and even negative in some parts of the world, GDP growth will remain low. We don’t exclude some inflationary pressures in the second and third quarters.”
On top of the gradual economic recovery, various governments may start to begin stockpiling certain commodities after the COVID-19 pandemic to ensure it has a supply during challenging times, noted Panizzutti.
“Last year should remain a good lesson on having better contingency plans, on being more self-sufficient. As a result, some countries will try to become more autonomous when it comes to the ability to counter any global crisis that results in trade and logistic disruptions,” he said. “For precious metals, this might mean that some governments may stockpile some commodities, like PGMs, to ensure that in uncertain times, production is safely assured.”
