LAWRIE WILLIAMS: Gold, silver and pgm one year price forecasts

On gold price forecasting should one put one’s trust in expert opinions, chart trends or just informed guesswork?  Certainly delegates to the annual London Bullion Market Association (LBMA)/ London Platinum and Palladium Market (LPPM) conference will comprise all of the above, so the annual exit poll forecast of where precious metals prices will be in a year’s time represents a consensus opinion which is certainly worth taking into account. 

The 2018 Boston end-conference poll taken a few days later in October thus looks like it may be uncannily accurate as far as gold is concerned, with an average price prediction of $1,532 an ounce.  This then bullish poll outcome was taken at a time when gold was struggling to maintain a level of around $1,200.  Predicting the yellow metal’s price a year in advance is an invidious task and certainly can be prone to substantial under- or over-‘guessing’ as individual ‘experts’ who contribute to the LBMA’s year-end forecasting competition have often found to their chagrin.  But the apparent success of last year’s ‘exit poll’ in coming up with an average figure which looks like being close to the likely gold price level of a couple of weeks’ time is drawing attention to this year’s forecast as being both a potentially accurate target price level and something on which to base one’s own precious metals investment strategy.

This year’s annual LBMA/LPPM meeting was held in Shenzhen, China and ended on October 13th and the unofficial average price predictions for the four major precious metals for a year ahead were as follows:  Gold $1,658, Silver $23, Platinum $1,182 and Palladium $1,924.  So although delegates were decidedly bullish on gold they were even more so on silver and platinum, both forecast to rise over 30%, with palladium and gold up around 10% and 11% respectively.

While we would concur on the potential gold price rise by mid-October next year, we would be rather more cautious on silver and the pgms - particularly the latter.  While gold remains a monetary/investment metal the others have a far stronger industrial take-up in their demand parameters - particularly the pgms.  The latter are heavily dependent on the automobile sector for their demand – platinum on the diesel market and palladium on the petrol (gasoline) internal combustion engine market, and these are in the midst of a seemingly unending downturn.  While –ever-increasing anti-pollution legislation may be suggesting rising pgm loadings in exhaust emission control catalysts (the big market) this is being offset by falling automobile and truck sales and the pgm supply/demand fundamentals may be being substantially affected by this.

Silver too has a strong industrial demand element in its own supply/demand equation and if the world is heading for a global recession, as many are predicting this too could see a substantial fall in demand, although it could be rescued by ever-growing solar panel development and sales.  Silver though has a much greater propensity to advance along with the gold price – and exceed gold’s advance in percentage terms when prices are rising.  However we do see the relationship between the two diverging from past performance in the years ahead so we view the LBMA/LPPM conference delegates’ average forecast as perhaps being too optimistic.  The Gold:Silver ratio is currently sitting at over 85, a historically high level, and while we see the ratio falling, perhaps not by quite as much as the conference delegates do (they are looking for a ratio of around 72 on the basis of their forecasts), we do still see the silver price as rising along with gold.

All the above has prompted us to make our own precious metals forecast as to where we see the prices in a year’s time.  Gold at around $1,650 - somewhat similar to the delegate average forecast, but then silver at around $21 – suggesting a gold:silver ratio at 78; platinum at a round $1,000 and palladium much where it is today at $1,750,  In fact we wouldn’t be at all surprised to see palladium a little lower in a year’s time.  Sticking my neck out I know, but readers will probably have forgotten my forecasts in a year’s time although, of course, if my figures are anywhere near correct I’m sure I’ll resurrect them and remind you all of the fact!

17 Oct 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com