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LAWRIE WILLIAMS: Gold, silver and pgm price forecasts for 2022

Looking back over the current year, all the precious metals have certainly fallen well short of nearly all expectations of a year earlier despite an upwards kick in gold and silver prices right at the year end.  At the end of 2020, predictions from most commentators, myself included, were that the coronavirus pandemic would be easing its way out of the economic equation by end 2021 and that precious metals prices would all likely end the year at higher levels.  How wrong can one be?  In the event, we have been faced with a new virus mutation driving infections in the leading economies in Europe and North America to new record highs, while all the precious metals have ended the year at lower price levels than at end-2020.

In the event, the gold price ended the year down around a small 2%, silver by 9%, platinum by 11% and palladium by a massive 24% - at least in Europe.  The price falls were somewhat mitigated by some decent rises right at the year-end.

It is thus with a degree of trepidation that this observer is again going to put his predictions on the line and try and forecast where prices of the main precious metals and stocks will end the year ahead.  Recognise that this is very much a subjective viewpoint, made at a specific point in time, and that there are any number of currently unpredictable geopolitical and geo-economic events and circumstances which will likely affect the eventual outcome.

As I see it, it is likely to be a positive year for all the major traded precious metals with the exception, perhaps, of palladium which, in my opinion, had risen too far too fast over much of the past couple of years.  More of that later when we discuss the prospects for the metals themselves individually.   Ironically that was very much my opinion of a year ago when I was proven very wrong in my assumptions, except perhaps for palladium which even underperformed my seemingly pessimistic-at-the-time end-2020 expectations. 

Not all observers see things the same way though.  For example The U.S.’s biggest bank, JP Morgan Chase, is forecasting gold to come off sharply in price towards the end of the year - to around a Q4 average of $1,520 due to an adverse reaction to potential Fed tightening measures.

Looking at the major metals in turn, my own reasoning for prices to advance is as follows:

Gold – here there will be a battle between the overall effects of rising and prolonged inflation and the world’s central bank efforts to bring it under control – the latter affected by the impact of the coronavirus and its effect on the global, and individual, country economies over the full year.  We feel that the overall effect on the metal price will be positive, and that gold may touch the $2,000 level again by the year end.  This would mean a rise of 10 or 11% after a tiny decline in 2021.

Interest rates and inflation are probably key here.  Gold tends to do better in a negative interest rate environment when investors are totally unconcerned about buying a non-interest generating asset.  Some well-respected commentators see negative interest rates persisting for some years yet as inflation levels look likely to remain higher than bank interest rates, and this has to be positive for the gold price.  Global geopolitical and geo-economic concerns will also likely keep the safe haven aspects of gold at the forefront of investment decisions too.

Silver:  Forecasters continue to predict great things ahead for silver, but we fail to agree.  Like gold we foresee a rise of around 10-11% only over the course of the year, although a probably short-lived peak to say $28 looks to be possible given the metal’s price volatility. 

Silver does have some very interesting industrial demand attributes which should cause it to rise substantially in the longer term, but probably not consistently for two or three years yet.  It still seems to follow ups and downs in the gold price but unlike gold, when prices peak, silver investors are more likely to liquidate their holdings, while gold investors tend to hold on.  This puts a natural brake on excessive silver price rises, but does not preclude occasional high price peaks.  We feel the long term potential for silver remains strong because its industrial demand is predominantly in growth sectors.

PGMs: Platinum and palladium are very much industrial demand driven nowadays, with any monetary attributes largely having faded away over the years.  Currently both are mostly demand-dependent on their usage as catalysts in internal combustion engine exhaust-cleaning systems and while palladium has tended to dominate in the much larger gasoline-powered light vehicle market, its big price premium over platinum has made real, or predicted, substitution issues bring the metal prices closer together.  In the longer term the rise in uptake of battery electric, or hydrogen fuel cell- powered non polluting vehicles will put a huge dent in demand for palladium in particular, probably leading to price parity between the two sister metals emerging within the next couple of years. 

Palladium prices had been riding particularly high due to a huge supply deficit, but this has largely fallen away, while a platinum supply surplus has also diminished, perhaps to zero.  Consequently we see platinum prices rising over the next year, and palladium being the only major precious metal where we see the price continuing to fall.  While price parity between platinum and palladium looks like occurring sooner rather than later with the former’s price rising and the latter’s falling, we now don’t see that happening in 2022, but it will likely come about before end 2023.

The ‘current’ prices set out below are as at around 3 pm on December 31st in mostly European trade, but could well be affected, up or down,  by North American activity before the current year ends in that sub-continent.

Table:  Precious metals price forecasts for end-2022

Metal

Current Price at Dec 31st 2021

Price forecast end-2022

Forecast y-o-y % change

Gold

$1823

$2000

+10%

Silver

$23.10

$25.50

+10%

Platinum

$947

$1100

+16%

Palladium

$1806

$1350

-27%

 The above table sets out our specific price predictions for the four major precious metals for the year ahead.  Overall it should be a positive year for all, apart from palladium, which we see as continuing its sharp price reversal in 2022 perhaps declining at a similar pace to that we have seen in 2021.

31 Dec 2021 | Categories: Gold, Silver, Palladium, Platinum, FOMC

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