Thomson Reuters GFMS has lowered its outlook on precious metal prices for 2016, with gold, platinum and silver all expected to take a dive due to a myriad of factors worldwide.
Last week, Erica Rannestad, senior commodities analyst for Thomson Reuters GFMS, shared her firm’s forecasts for the year.
Here they are, broken down by metal.
Gold: Low First Half, Higher Second Half
Thomson Reuters GFMS lowered its 2016 forecast for gold from $1,250 an ounce to $1,164, which is basically flat year-over-year. The yellow metal finished 2015 with an average per-ounce price of $1,160.
Rannestad said they downgraded their forecast after gold prices failed to climb as high as expected in the fourth quarter 2015.
The gold price is expected to bottom out in the first six months of the year, dipping as low as $1,040 an ounce, but recover in the second half.
So far this year, the metal has averaged $1,095.65.
While gold prices are not predicted to soar in 2016, Rannestad said the metal is still considered a safe haven investment, and safe havens are expected to reemerge as a theme this year because of currency fluctuations, weakness in the equities market and the slowdown in the Chinese economy.
“Gold has reasserted itself as a safe haven investment so far this year,” she said.
Platinum: A “Big Downgrade” in Price
In mid-2015, analysts predicted that the price of platinum would remain below the price of gold into, and possibly through, 2016.
Rannestad said this remains the case, and that Thomson Reuters GFMS has dropped its forecast even farther for platinum to an average of $844 an ounce for the year, a “big downgrade.”
So far in 2016, the white metal has averaged $848.07.
“It’s actually unprecedented” for the price of platinum to remain below gold for such an extended period of time, she said, noting that the platinum-gold ratio hit a historic low in November and, as of last week, was still sliding.
Conspiring to depress platinum’s price are the fact that analysts underestimated the impact oversupply was having on the market and the Volkswagen scandal.
Platinum is used in cars that burn diesel fuels. When the news broke that the German carmaker had been equipping diesel vehicles sold in the U.S. with “defeat devices” that allowed them to cheat on emissions tests, investors feared it would hurt overall demand for diesel vehicles and, consequently, platinum.
“The scandal definitely hurt the sentiment toward platinum in the market,” Rannestad said.
Palladium, a platinum group metal, is forecast to average $569 this year, with auto catalyst demand and a slight decline in supply driving its price. The metal finished last year with an average per-ounce price of $690.
Silver: Jewelry Demand is Down
Thomson Reuters lowered its price target for silver as well, from $17.75 to $15.95.
While physical investment demand is fairly strong, Rannestad said there’s weakness in both industrial and jewelry demand. Lower prices have made gold more attainable, and there’s also growing interest in yellow gold jewelry.
“Silver kind of has taken a backseat in the jewelry market,” she said.
The metal has average $14.04 so far this year.