(Kitco News) - BNP Paribas lowered its 2013 and 2014 average price forecast for silver and platinum on Thursday, citing weakness in gold for silver’s weaker outlook and softer demand for European autocatalysts for a reduced price outlook for platinum.
The bank left its palladium average price forecast unchanged, and said the metal is its “favorite pick of the precious metals complex,” citing the likelihood palladium will remain in a supply deficit for the next two years. They caution, though, of all the precious metals, palladium is the most sensitive to changes in risk appetite.
BNP Paribas cut its average silver price outlook for 2013 by $2.75 an ounce, to $31.35 and its 2014 average price outlook by $1.65 to $28.45. The bank forecast platinum’s price to average $1,660 an ounce in 2013, a cut of $80, while the 2014 forecast is $1,730, down $100. The palladium price forecast for 2013 and 2014 remain unchanged at $800 an ounce and $1,000, respectively.
For silver, Anne-Laure Tremblay, precious metals strategist at the bank, said an improved economic outlook should support a rebound in industrial demand, while jewelry demand has benefitted from substitution from gold. Investment demand will be dependent on the outlook for gold.
She said while investment demand has held up in early 2013 despite outflows from gold, investment demand for silver may subside if gold’s weakness continues.
“We find this divergence surprising given that silver investment demand tends to be closely linked to sentiment towards gold. A reversal in trend is therefore likely in the next two months if our forecast for a subdued gold price performance proves correct,” she said.
However, by the second half of this year, investment demand may be stronger. “We expect silver’s performance to be muted in the short term. (The second half of 2013) should see a rebound in the price. Silver will be vulnerable to a sharp correction once the gold rally ends in 2014, as expected,” Tremblay said.
Platinum is being stung by the reduced auto demand in Europe and that should slow industrial demand this year, she said. Investment demand will likely be influenced by events in South Africa’s mining industry and the price of gold. On the supply side, mine supplies should pick up, but remain under 2011 levels, while autocatalyst scrap is expected to rise sharply this year. After being in a supply deficit in 2012, platinum’s supply and demand fundamentals should be largely balanced this year.
“The outlook for South African mine supply is the biggest uncertainty to our price forecast,” she said.
Palladium autocatalyst demand should grow about 3% year-over-year, but the industrial demand for the metal is expected to be hit by substitution and thrifting, Tremblay said. Investment demand will remain high because of palladium’s positive fundamentals.
She is expecting only moderate growth in mine supply and said that Russian state stockpiles could become depleted in the next few years. Overall, Tremblay reiterated she is most favorable to palladium.
“Palladium’s upside potential is greatest amongst the precious metals complex on a 18-month basis, given its strong fundamentals,” she said.
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By Debbie Carlson of Kitco News firstname.lastname@example.org