Could this be a breakout year for precious metals?
The Investing News Network spoke with analysts and market insiders to get their best 2024 forecasts for this sector.
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Gold remained rangebound for the first two months of the year, staying above the US$2,000 level until it briefly broke through support in the middle of February, falling to its quarterly low of US$1,991.98 on February 13.
Following this low, gold began a slow climb toward the start of March, ultimately soaring to a quarterly high of US$2,251.37 on March 31. Gold has continued to move since then, briefly passing US$2,400 on April 12.
The first eight weeks of the year saw key gold market trends extend from 2023.
“One area of note in the ETF landscape is the Asian region. The Asian-domiciled ETFs, while smaller than the US and European markets, are positive in terms of net flows year-to-date (were positive in 2023 as well). This amplifies the importance of looking into the detail as it relates to gold investment to get a complete picture,” he said.
Other notable central bank buyers during the first two months of the year included Turkey, which added 16 MT of gold, Kazakhstan which purchased 12 MT, and India, which increased its reserves by 13 MT.
“With ETFs still seeing outflows, I think there’s a new buyer in the market, one that’s also interested in physical gold, not paper substitutes. This could be sovereign funds joining central banks, other institutions or other deep-pocketed players who don’t really care that much about the price, deciding that the time has come to hedge with gold,” he said.
By the middle of March, gold had set record highs and was pushing against resistance at the US$2,200 mark.
Gold price, Q1 2024.
More broadly, Cavatoni sees conditions setting up for broader global interest in gold.
“As central banks continue to be significant buyers and geopolitical risks and global uncertainties drive investors towards the perceived safety of gold, the current environment underscores gold’s importance as a strategic asset for portfolio diversification and risk mitigation. Therefore, while there may have been a perception of western disinterest in gold, recent developments indicate a sustained and broad-based demand for the precious metal,” Cavatoni said.
Gold stocks started to gain some momentum in March, but have been slow to take off.
Tiggre attributed this lag to a misreading by investors who had expected the gold price to retreat from all-time highs.
“It’s my view that the ‘smart money’ in the west thought gold had spiked and its next big move would be down, so gold stocks were ‘leading’ gold lower. However, it’s increasingly clear that that call was wrong, and I expect to see the stocks outperform this year when those who got it wrong realize their mistake,” he said.
“I’ve never seen this much of a disconnect before while the gold price is breaking out,” he said. “I’ve seen … this much of a severe deficit twice before, when the gold price was threatening to break down to a much lower level.”
The last two times this happened, there were huge moves for juniors within six months of the start of the reversion.
While the second quarter of the year is just beginning, the yellow metal has already made some major gains. Gold continues to make moves and has even traded above US$2,400 for the first time ever.
While gold is traditionally viewed as a safe haven during times of geopolitical tension, Tiggre said the ongoing nature of these conflicts has caused an evolution of sorts for investors. “Unless one of these conflicts spreads, I don’t think either will have much impact on gold. They are part of the new normal background level of political radiation,” he said.
For Tiggre, a key point to watch is continued buying of gold from outside of the sphere of influence, where he thinks there is a push to move away from the US dollar. He also expects a recession, which he believes will move gold higher.
For his part, Cavatoni believes continued uncertainty around geopolitical events and the macroeconomic landscape may be a tipping point for western investors. “Will those Fed rate cuts be enough to move investors back into the gold? We believe this will serve as a catalyst to bring back the western investor, even at these high prices,” he said.
If gold continues to rise in Q2, it could prove a critical time for the yellow metal and gold stocks. Producers are likely to move first, followed by companies with advanced-stage projects and lastly juniors. However, it’s important for investors to remember with rate cuts uncertain, the momentum in the market now could just as easily shift into decline.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Affiliate Disclosure: The Investing News Network may earn commission from qualifying purchases or actions made through the links or advertisements on this page.
At the beginning of April, gold was at US$2,250, finding support from investors betting on a June interest rate cut from the US Federal Reserve, as well as strong central bank buying. The precious metal found further support in May as geopolitical and sovereign debt concerns weighed on investors in China and the Middle East.
On May 20, gold hit US$2,450.05, its highest price ever. Read on for more on how it got there and what’s next.
The biggest story for gold in Q2 was its price activity. As mentioned, strong momentum carried over from March, allowing the yellow metal to break through US$2,400 in mid-April. Its price gains were influenced by various factors, including continued buying from central banks, strong demand from Chinese retail investors and better sentiment from western investors, which helped to stem flows out of gold exchange-traded funds (ETFs).
“All of a sudden, gold was off to the races. It jumped so high that all of a sudden you had some short covering that needed to happen then as well. So you had short covering, which means they’re buying. And then you had momentum chasers and traders jumping all in. That was a pretty good spike … that’s what kind of started all of this,” Clark said.
Gold price, Q2 2024.
This uncertainty has created resistance for gold, which finished Q2 at the US$2,325 level.
On the flip side, the worst-performing ETFs for the quarter in terms of flows were primarily from Europe, with German and UK funds holding six of the slots, with two Swiss, one French and one American fund rounding out the bottom 10.
For the most part, gold stocks haven’t yet reacted to the elevated gold price.
“The central banks have been buyers of gold, but they aren’t buyers of gold shares. So it makes perfect sense that because the audience for gold, at least temporarily, has changed, that this dichotomy exists,” he said.
Clark also noted that the juniors that aren’t in the GDXJ have been underperforming, but given how well gold has performed it’s just a matter of time. “I think the fuse has been lit, because once gold starts to move the money will move down into the producers, then developers and then juniors,” he said.
“With the price of gold above US$2,000 an ounce, people are looking at junior explorers and saying, ‘What have they found and could that really grow?’ You’re watching the high-cost producers suddenly start performing because now they’re moving into the positive territory in their earnings, and there are some M&As still going around as people say it’s faster and possibly cheaper to buy the ounces than to drill and wait for the results,” he said.
With the price of gold changing so fast, Clark has had to make some adjustments to his forecast for the rest of the year. For him, the next level to watch is US$2,500, and he is confident it will get there this year.
“We had a 38 percent rise in the gold price, in this upcycle, but the average upcycle is much higher, and if this upcycle were to end today it would be the lowest in history,” Clark said.
Overall, experts believe a great deal of potential has yet to be unlocked in the gold price as well as gold companies. The current market may provide opportunities for investors who have been waiting on the sidelines to invest in producers or ETFs, and — depending on risk appetite — chances to get exposure to well-positioned juniors.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Australia is the second largest gold producer worldwide, and it’s home to some of the largest gold miners.
Gold is often a suggested safe investment for any portfolio, and there are a number of ways to invest. The most straightforward route is to buy physical metal, but exchange-traded funds and individual stocks are also an option.
Market cap: AU$15.08 billion; current share price: AU$13.17
Northern Star Resources is an Australian gold company with both open-pit and underground projects in Western Australia and North America; its assets are located at its Kalgoorlie, Yandal and Pogo gold production centres.
Market cap: AU$6.02 billion; current share price: AU$3.03
Evolution Mining, based in New South Wales, is a leading Australian gold-mining company with five fully owned operational mines in Australia and Canada. Evolution is confident that its plan of creating a high-quality portfolio of low-cost mines will allow it to grow the business for its shareholders.
Market cap: AU$2.32 billion; current share price: AU$1.69
Aside from its three mines, Perseus’ portfolio includes a 70 percent interest in the Meyas Sand gold project in Sudan, and a 31.4 percent stake in the Koné gold project in Côte d’Ivoire.
Market cap: AU$2.28 billion; current share price: AU$1.22
Western Australian gold explorer De Grey Mining is well established in the prolific Pilbara region, where its focus is the wholly owned Hemi gold project. In late 2019, the company made a large-scale, near-surface gold discovery at Hemi.
Market cap: AU$1.85 billion; current share price: AU$2.95
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
2023 was a relatively lackluster year for silver, which largely traded between US$22 and US$25 per ounce.
The white metal started 2024 on a similar note, with its price remaining fairly rangebound for the first eight weeks of the year. It dropped to US$22.08 on January 21, marking its quarterly low.
Silver started seeing gains in March on expectations that the US Federal Reserve was getting closer to lowering interest rates. Improving sentiment gave precious metals momentum, causing silver to reach its quarterly high of US$25.62 on March 20; it then continued on to an 11 year high of US$29.26 on April 12.
These gains were reinforced by positive language following the Fed’s March meeting, when the central bank said inflation was continuing to progress toward its target of 2 percent. Even though it was unwilling to commit to dates, the Fed suggested it was done with hikes and was expecting to make three cuts to its benchmark rate in 2024.
Silver price, Q1 2024.
While gold captured attention as it set price records in March and April, silver has produced better returns for investors. In an April 9 email to the Investing News Network (INN), Peter Krauth, editor of Silver Stock Investor and author of “The Great Silver Bull,” commented on the white metal’s performance during the quarter.
“Silver also typically lags gold, then catches up and surpasses it. We’re starting to see that happen in spades right now. Since the end of February, gold is up about 15 percent, while silver is up about 22 percent,” he said.
Krauth emphasized, “Those are breathtaking gains in just a matter of weeks.”
According to Krauth, this rise came alongside decreasing inventories at the COMEX, London Bullion Market Association and the Shanghai Gold Exchange, where stockpiles have dropped 40 percent over the past three years.
“That helps explain why the silver price didn’t rise in the face of ongoing deficits. But these inventories are being drained, and I think there may be 12 to 24 months left before they run out.”
Also helping to draw down inventories is industrial demand for silver. The biggest contributing sectors are related to the energy transition, particularly the production of photovoltaics and electric vehicles.
Krauth pointed to the Silver Institute, a top industry association, which is calling for silver to record a structural deficit for the fourth consecutive year in 2024, with shortfalls to continue for several more years.
India has been a critical driver of demand, importing 94 million ounces of silver in the first two months of 2024, including 71 million ounces in February alone — that represents nearly an entire month of global mine production.
While the Silver Institute notes that demand for silverware and jewelry in India remains strong, it also says there is growing industrial demand as India sees an increasing focus on infrastructure development.
This comes as new N-type solar cells, which require greater amounts of silver, enter mass production in 2024.
On the supply side, the Silver Institute is predicting a decline of 1 percent in 2024, with 1 billion ounces being made available. Recycled quantities of silver are expected to remain flat at 178.9 million ounces, while the biggest drop is seen coming from mine production, with an estimated total of 823.5 million ounces in 2024.
This differential suggests a widening deficit of 215.3 million ounces, a year-on-year increase of 17 percent.
Silver is primarily produced as a by-product of gold, lead, zinc and copper, with these mines accounting for 595.2 million ounces in 2023. Meanwhile, primary silver mines produced just 235.2 million ounces.
With a contraction in mine output forecast for 2024 and increasing industrial demand over the next several years, the Silver Institute is projecting more tightness over the next few years.
Krauth sees two standout projects set to add millions of ounces over the next year.
Krauth sees strong upside in silver’s industrial applications, although he believes many market participants still see it largely as a precious metal. However, attitudes may be starting to change.
Krauth thinks such a move would boost silver’s status among investors, and is a point to watch in Q2.
“I, along with the entire sector, will be watching closely to see whether silver makes the list or not. If it does, I think that would be a shot in the arm for silver. The broader investment community would pay more attention to silver’s significant structural supply shortages,” he explained to INN.
Krauth wouldn’t be surprised to see a pullback in silver this year, but thinks it is in a sustained bull market. He expects the price to continue to hold at US$28, and probably grow to US$30 in the second half of the year.
As silver sees upward momentum going into the next quarter, it may present opportunities for investors who want an alternative to gold, or are keen to take advantage of the white metal’s increasing role as an industrial metal.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
After starting the year trading in the US$22 per ounce range, the price of silver saw little change until March, when the white metal began to gain momentum following a US Federal Reserve meeting.
While the Fed left interest rates steady at that time, dovish language provided critical support for silver as investors pushed the price above US$25. Silver continued its upward trend through April and into May, when it climbed above US$32 for the first time since November 2012 and set a year-to-date high of US$32.07 on May 27.
A number of factors have been driving the price of silver upward in 2024.
Even though rate cuts from the Fed have yet to materialize, softening interest rates and slowing economic growth have led to greater speculation that at least one reduction will come in the second half of the year.
Silver was initially followed gold higher in the March to May period. However, the gains in silver have outpaced gold nearly two to one in 2024. To date, silver has risen nearly 30 percent, while gold has only gained 15 percent.
Silver price, January 1, 2024, to July 16, 2024.
In an email to the Investing News Network (INN), Silver Institute President and CEO Michael DiRienzo said that the close link between silver and gold has led some investors to use it as a leverage play to gain exposure to gold.
“In addition, silver’s low unit cost and lower entry level have also made it more attractive to retail investors with a limited investment budget,” DiRienzo explained.
“That market dynamic has changed, and it’s moving more strongly with gold again as a monetary metal should … I think it’s fantastic news for silver — and long-suffering silver bulls out there,” he said.
Improved sentiment has coincided with heightened industrial demand, particularly in the Indian market. Overall, silver demand is projected to grow by 2 percent in 2024, with the Silver Institute forecasting that industrial demand will increase by 9 percent — photovoltaics alone are expected to see a 20 percent gain.
DiRienzo said that while the primary silver demand in India continues to be from the production of jewelry, the precious metal has also benefited from “firmer electrical & electronics demand, thanks to the continued strength in India’s real estate market and rising investment in local infrastructure construction.”
Additionally, he noted that Indian manufacturing of solar cells received additional support as companies reduced their reliance on Chinese manufacturing and diversified their supply lines for solar panels.
Last year, a flagging Chinese economy not only put base metals under pressure, but dragged on silver as well. According to DiRienzo, fiscal stimulus measures implemented by the Chinese government have provided crucial support.
“Expectations on further fiscal stimulus for the Chinese economy led to a sharp rebound in base metal prices during 2024-to-date, which has benefited silver,” he said.
While both retail and industrial demand is growing, it’s not just demand driving prices.
According to the Silver Institute, Mexico and Argentina had steep output declines in 2023, with production falling by 10.9 million ounces and 4.9 million ounces, respectively. The Silver Institute predicts that global production will fall further in 2024 to 823.5 million ounces due to the closure of several mines in Peru.
While it isn’t expected to eclipse these declines, new silver supply is coming online from various sources this year.
Despite these new and expanded mining operations bringing significant new silver supply to the market, it’s still a far cry from meeting the more than 200 million ounce deficit.
While gold tends to garner more of the media attention, silver has already been a stronger performer in 2024. Since its move began this year, a variety of experts have suggested the white metal has further to go.
“We still have the gold-to-silver ratio somewhere around 75; it’s averaged about 55 or 60 over the last few decades, so just on that basis if gold were to stay put, silver has a lot higher to go,” Krauth said.
“Typically when you get the ratio running down, both metals do well, but silver continues to do even better … so look for this to be a really tremendous run over the next months and years,” he added.
While this might not be good news for manufacturers that require silver and consumers who buy their products, it’s positive news for existing silver investors and new market participants who are looking for opportunities for a safe-haven investment that doesn’t come with the high entry point of gold.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Affiliate Disclosure: The Investing News Network may earn commission from qualifying purchases or actions made through the links or advertisements on this page.
The precious metal silver is often compared to gold, and is important in jewellery and as a safe haven.
Unlike gold, silver has many industrial applications too, including in electronics, automobiles, medicine and photography, and, of course, silverware. Energy transition applications are a growing demand sector for silver — the metal is valued for its conductive capacity, which makes it particularly useful in the production of photovoltaic panels.
Silver also set a new all-time high in Australian dollars on May 29, when it climbed to AU$48.46. While the price of silver has pulled back below US$30 in recent weeks, it has still been trading at levels not seen since 2021.
Market cap: AU$950.72 million; share price: AU$2.95
Market cap: AU$233.75 million; share price: AU$0.145
Silver Mines is an advanced-stage silver exploration and development company focused on its Bowdens silver project, which is located in Central New South Wales, 26 kilometres east of Mudgee.
Market cap: AU$64,94 million; share price: AU$0.041
Investigator Resources is a polymetallic exploration and development company with assets throughout Australia and Tasmania. Its flagship property is the Paris silver project, located on South Australia’s Eyre Peninsula. The company has referred to Paris as Australia’s highest-grade undeveloped silver project.
Market cap: AU$45.61 million; share price: AU$0.145
Market cap: AU$10.14 million; share price: AU$0.089
Lode Resources is an exploration company focused on the development of assets within the New England Fold Belt. Its flagship property is the Webbs Consol silver-base metals project, located 16 kilometres southwest of Emmaville, New South Wales. The resource was originally discovered in 1890 and was mined until the mid-1950s.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
After posting a sizeable surplus of 776,000 ounces in 2022, platinum market dynamics began to reverse course last year on the back of strong demand and decreased supply for the precious metal.
And of course, platinum is party to considerable demand from investors looking for a safe haven.
Read on to learn more about the factors that moved the platinum market in 2023 and what to expect in 2024.
On the supply side, 4,046,000 ounces of platinum were produced globally from Q1 to Q3 of last year, down 2.63 percent year-on-year. The majority of platinum production comes from South Africa, where mines continued to face electricity problems at the start of the year, leading to significant production deficits year-on-year in Q1 and Q2.
Production in the country improved slightly over the course of 2023, and Q3 output was up by 19,000 ounces compared to Q3 2022, marking the first quarter to see a year-on-year production increase since Q4 2021. The WPIC notes that the increase was the result of better management of load curtailment and less downstream processing capacity downtime.
Platinum price from January 1, 2023, to December 31, 2023.
Russia, Zimbabwe and North America also produce significant amounts of the metal, and all three saw production increases compared to 2022, partially offsetting South Africa’s losses.
Russia’s platinum production rose 6.96 percent to 537,739 ounces due to deferred downstream maintenance, while Zimbabwe’s output was up 3.82 percent to 370,467 ounces. Meanwhile, North America’s output increased 3.76 percent to 204,740 ounces. The three regions combined for an additional 56,038 ounces.
Supply was also impacted by a 12.98 percent decrease in recycled platinum, which came to 1,094,000 ounces in the first nine months of 2023, down from 1,257,000 ounces in 2022.
This overall decrease in platinum supply has been set against a backdrop of increasing demand, which came in at 6,077,500 ounces in the first nine months of 2023 compared to 4,767,000 ounces in 2022. Uptake was largely driven by increased production in the automotive sector, which has begun to return to pre-pandemic levels.
In an email to Investing News Network (INN), Edward Sterck, director of research at the WPIC, said recycled platinum supply from vehicles is down at the same time. “Recycling supply has been held back by a shortage of end-of-life vehicles as consumers are running existing vehicles for longer,” he explained.
Platinum demand was also bolstered in 2023 by investors beginning to return to the market, with 322,000 ounces being traded through the first half of the year as opposed to a net selloff of 327,000 ounces in the first half of 2022. The biggest change came from investment inflows from exchange-traded funds, which saw 196,000 ounces purchased in the first half of 2023 versus outflows of 278,000 ounces in the first half of 2022.
However, even though platinum is expected to end 2023 in a deficit, the price finished the year at US$987.25, significantly down from its yearly peak of US$1,124.28 on April 21, as aboveground stockpiles came into play.
“The biggest issue facing the platinum market in the past year has been the development of a record supply/demand deficit, which has been met by a drawdown from aboveground stocks that has acted to suppress a response in the platinum price,” Sterck commented to INN.
Wilma Swarts, director of PGMs at Metals Focus, told INN she sees a continued supply deficit going into 2024.
“Mine supply is at risk of increasing decline,” she said. “Given the inflationary costs of wages, power and the weakening rand, more than 50 percent of mines in South Africa are loss-making at the spot basket price. We can expect to see production curtailment and mine closures if prices remain at current levels over the next two to five years.”
Rohit Savant, vice president of research with CPM Group, also mentioned to INN that supply curtailment is a concern, although he doesn’t see it happening until after 2024.
“While mining companies are expected to be challenged by the weakness in prices, cutting production this year is likely to be difficult, especially in South Africa” he commented. “Especially since it is an election year, and so much of South African employment and GDP is dependent on the mining sector.”
However, with aboveground stocks still in play, investors may have to wait to see the platinum price move.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Platinum prices have been volatile this year despite high demand and an ongoing supply deficit.
Stockpiles of the metal eroded in 2023 as industrial demand hit record highs, with consumption outstripping mine supply by 851,000 ounces. During the first six months of 2024, those trends continued to play out.
Read on to find out more about how platinum performed in the first half of this year.
Platinum prices spent much of the first quarter in decline, falling from US$987.50 per ounce on January 1 to a year-to-date low of US$871.67 on February 9. The start of March brought increasing volatility in the platinum market, with prices moving up slightly during the month as prices for gold and silver improved.
Platinum price chart, January 1 to July 29, 2024.
Platinum started the second quarter at US$901.64 and climbed as high as US$980 before pulling back to US$900 by late April. The price ran even higher in May and reached a year-to-date high of US$1,094.50 on May 17.
While platinum prices sank again, the floor hit on June 13 was higher at US$949.34.
According to the report, these dynamics are in part due to strong automotive demand, which reached a seven year high in Q1. Platinum has been increasingly substituted for palladium in autocatalysts due to palladium’s high price.
Despite increased demand for platinum from the automotive sector, its use in the coming years is facing headwinds as consumers continue to move to electric vehicles, which don’t require platinum or palladium. However, to platinum’s benefit, the WPIC notes that the market share of battery electric vehicles is now forecast to grow from 11 percent in 2023 to 14 percent in 2024 — down from the 15 percent initially predicted.
In a mid-July platinum-group metals webinar hosted by CPM Group, Rohit Savant, CPM’s vice president of research, indicated that despite increased platinum demand, the needle on prices hasn’t budged.
Additionally, he explained that massive amounts of inventories have built up over the past decade, which has led to “investor reluctance to add metal aggressively to holdings due to risk of loss of demand from the auto sector.”
Savant noted that these inventories can provide further headwinds when supply and demand fundamentals are not strong, which has been the situation for the past several years.
According to the WPIC, these inventories accounted for 4.1 million ounces at the end of 2023. With forecast deficits, the group is expecting those inventories to fall to 3.62 million ounces by the end of 2024.
Meanwhile, investment demand is changing. Savant noted that 2023 saw platinum exchange-traded funds (ETFs) in decline. This is supported by WPIC data showing that the last half of the year saw more than 215,000 ounces of ETF outflows. Bar and coin demand was relatively stable during the period, with net inflows of 147,000 ounces.
The first quarter of 2024 saw a reversal of this trend, with platinum ETFs adding 11,000 ounces, and bar and coin investment for the precious metal growing by 64,000 ounces.
Savant acknowledged this turnaround with data that extends into the second quarter.
“Investors were solid buyers of the metal,” he said. “These investors have been seen buying when prices fall and pulling back when prices rise. This tells us that these investors do not necessarily see too much downside from here, but are still nervous about chasing (the) platinum price higher.”
Total platinum supply for Q1 was 1.625 million ounces from all sources, marking the second lowest quarterly supply on WPIC records, behind Q2 2020’s 1.3 million ounces. In its report, the WPIC states that it expects supply risks to remain a theme through 2024; it predicts that total mine supply will decrease by 3 percent on an annual basis.
Mine production increased in the first quarter on an annualized basis, rising to 1.24 million ounces from 1.19 million ounces during the same period in 2023. The rise came from higher output from mines in top producer South Africa, which produced 816,000 ounces versus 778,000 ounces in Q1 2023.
The WPIC data also suggests that recycled supply during the quarter was stable, with 390,000 ounces entering the market, slightly lower than Q1 2023’s 400,000 ounces. The bulk of recycled platinum was generated by autocatalyst recycling, which produced 275,000 ounces of the metal.
Despite the platinum market imbalance, overall sentiment remains positive. Even as an overhang in stockpiled inventories provides headwinds, the metal still has strong demand from industrial sources.
With the platinum to palladium ratio above 1, some investors are wondering whether automakers will begin to swap palladium for platinum again. However, Savant doesn’t see this materializing until the ratio gets higher.
“The reality is that autocatalyst manufacturers are unable to and do not make changes to autocatalysts and chemistry on the turn of a dime,” he explained during CPM’s webinar.
“There’s a lot of money and time required to make these changes and align them with emission regulations and auto insurance. So it will take a much higher ratio than what we’re seeing, and a ratio that remains consistently high.”
As automotive demand is expected to remain high, potentially allowing inventories to start depleting, the physical market could begin to tighten and provide support for upward price momentum. However, it may be some time before these inventories draw down sufficiently to provide that support.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Sector participants were also keeping an eye on retail investment demand for the metal. Swarts noted that after contracting by 11 percent in 2022, this segment of the market was expected to decline further in 2023.
What ended up happening to palladium in 2023, and what’s coming in 2024? Read on to find out.
The price of palladium was under constant pressure in 2023. Starting the 12 month period at US$1,800.08 per ounce on January 2, the precious metal slid throughout the year to finish at US$1,098.49 on December 29.
This poor performance came on the back of a stellar few years for the metal, which remained above US$2,000 for much of the early 2020s, trading at around double platinum’s price. Palladium peaked in March 2022, when it climbed to US$3,180 as fears over supply shortages took hold after Russia’s invasion of Ukraine.
“While Russian production remained primarily unaffected during 2022, the self-sanctioning action of equipment suppliers could rein in 2023 production and should be closely monitored,” said Swarts at the start of 2023.
Palladium price from January 1, 2023, to December 31, 2023.
In a January 2024 email to the Investing News Network (INN), Rohit Savant, vice president of research at CPM Group, said the price of palladium has also been impacted by the growing number of electric vehicle sales as more consumers shift away from gas engines that require catalytic converters to control emissions.
The expectation for 2024 is that palladium will continue to be dogged by excess aboveground supply.
Savant suggested that falling basket prices will continue to affect miners going into 2024, and may have a negative impact on palladium supply. However, he doesn’t see much relief coming for prices.
“For prices to rise in any meaningful way, there would need to be some sort of supply reduction or disruption,” Savant explained to INN. “While mining companies are expected to be challenged by the weakness in prices cutting production, especially in South Africa, this year is likely to be difficult. Especially since it is an election year, and so much of South African employment and GDP is dependent on the mining sector.”
Metals Focus also expects continuing palladium price pressure in the coming year. In a January 2024 report, the firm suggests that existing stockpiles and significant investor shorting will be themes that carry over from 2023, although weakening demand will lead to a smaller deficit in the space.
Like Savant, Swarts said declining demand puts mine supply at risk. “Given the inflationary costs of wages, power and the weakening rand, more than 50 percent of mines in South Africa are loss-making at the spot basket price,” she said. “We can expect production curtailment and mine closure if prices remain at current levels over the next two to five years.”
In addition, Metals Focus is predicting a boost in recycled palladium owing to a 16 percent increase in autocatalyst scrap supply as consumers replace aging cars following a two year decline during the pandemic. Many of these vehicles have higher palladium loadings, and this is expected to push overall supply up 1 percent.
Palladium is not expected to see a substantial recovery in 2024, and investors considering investing in the sector should take note of the metal’s short-term challenges and long-term outlook when weighing opportunities.
Given the ongoing conflict between Russia and Ukraine, manufacturers continue to look for alternative suppliers of the metal. Edward Sterck, director of research at the World Platinum Investment Council, suggested palladium will start to move into a surplus situation starting in 2025, in part due to autocatalyst recycling.
“The outlook for palladium is dependent upon a significant increase in the supply of recycled metal; the shortage of end-of-life vehicles could push out the tipping point for palladium to later in the decade,” he said.
Looking even further, many countries plan to phase out sales of internal combustion engine vehicles between 2030 and 2040 in favor of electric vehicles and other new energy vehicles, which don’t require palladium.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
The metal declined steeply through the first two months of 2024, reaching a yearly low of US$859.15 on February 9. However, palladium saw momentum in March, trending upward alongside gold, silver and platinum.
At the start of April, the price of palladium was US$996.28, and it quickly accelerated to reach a year-to-date high of US$1,098 on April 9. However, the metal once again pulled back after hitting that level, plunging below the US$900 mark at the start of June. Palladium then surged to end the second quarter at US$963.50 on June 28.
The price has since regressed again, approaching a near yearly low of US$881 on July 29. Read on to learn what’s been driving palladium so far this year, and what factors may impact its performance moving forward.
Palladium and platinum are both used for investment, but have important industrial uses that claim the majority of demand. Auto sector demand has a strong impact on palladium in particular as it has few other uses.
Palladium price chart, January 1 to July 30, 2024.
The WPIC is expecting palladium mine supply to remain relatively stable, with around 6.5 million ounces per year entering the market over the next five years. Meanwhile, the organization predicts that palladium recycling supply will increase from 2.64 million ounces in 2024 to 3.83 million ounces in 2028.
Overall, the WPIC is calling for palladium demand to outstrip supply in 2024 by 1.28 million ounces, and by 234,000 ounces in 2025 before entering surplus territory.
The WPIC says the increase in recycled palladium supply is coming as a higher number of “PGM-rich vehicles” reach the end of their lives. These are expected to boost annual palladium recycling by over 1.3 million ounces by 2028.
Because platinum and palladium are interchangeable, manufacturers will often swap one out for the other as they try to find the best price. After breaking above US$3,000 in February 2022, palladium has been on a downward slide as auto manufacturers did exactly that, opting to use platinum, which was trading at around the US$1,000 per ounce level.
Though the two metals are now trading at near parity, there hasn’t been any desire to swap the two, even as platinum begins to edge higher. These dynamics are creating further headwinds in the palladium market.
In a mid-July platinum-group metals webinar hosted by CPM Group, Rohit Savant, CPM’s vice president of research, explained that given the costs associated with changing chemistries, the disparity between palladium and platinum prices will need to increase and be sustained before manufacturers consider a swap.
Savant went on to say that even though vehicle sales are expected to remain strong in 2024, gas-powered cars continue to lose market share to electric vehicles (EVs), which don’t require palladium.
This has been particularly impactful in the Chinese market, where there is higher EV demand.
“Even though you are seeing a substantial increase in vehicle sales, it may not necessarily translate into stronger demand for palladium,” Savant commented during the webinar. “That’s primarily because of the ongoing strength in the EV market share in China, and also the government incentivizing the Chinese market to either buy EVs or to buy smaller passenger vehicles, both of which are not supportive of palladium demand.”
Although some palladium demand comes from electronics production and investment, the auto industry is the metal’s primary driver. As increased recycling and higher supply begin to take hold, the price is not likely to increase; in addition, substitution isn’t likely to occur unless the price of platinum rises more substantially.
However, while near-term prospects don’t look strong, palladium’s low price may provide less risk-averse investors with opportunities, especially if the precious metal’s price continues to retreat.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
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