Why platinum and palladium have dropped in 2023, and what to wait for
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The US dollar isn't the most promising asset for investment in 2023 – and historically, metals have often become alternative options during such times. Gold has shown substantial gains compared to the USD, while silver has also performed well, though to a lesser extent. However, platinum and palladium are far from their metal colleagues' figures. But why and what factors have affected the prices? Let's find the answers.
Let us begin by examining the chart illustrating price changes since the beginning of 2023 – here, we have the performance of notable metals like gold (XAUUSD), silver, platinum, and palladium.
There is a typical case when gold and silver move in the same direction, opposite the USD trend. In 2023, this trend has persisted because of the Fed's move towards easing its hawkish policy. In other words, investing in US dollars has become less appealing for market participants compared to 2022, making it possible for gold and silver to snatch a safe haven label. Moreover, many experts believe that the US economy is just beginning to slow down.
What about platinum and palladium? The thing is that gold and silver have significant ties to the jewelry segment; platinum is used both in jewelry and industry, while palladium serves primarily as an industrial metal. Such differences can result in diverse reactions to market developments.
These reactions could be influenced by micro-events. For example, the chart above shows growth in platinum prices during the spring. The reason behind this was operational issues a large-scale platinum producer in South Africa had faced. These issues raised fears about possible deficits.
Macro events can also play a significant role. The world economy isn't experiencing rapid growth at the moment. Therefore, the demand for platinum and palladium seems lackluster. Both metals (especially palladium) are commonly used in car manufacturing. A logical conclusion offers itself: reduced car sales translate into decreased demand for these commodities. Plus, the production of some new electric vehicles has eliminated the need for palladium.
And following world economy growth prospects, including China, don't bring much hope either. As a result, many experts lowered their platinum and palladium price targets for the second half of 2023 and 2024. Nevertheless, even in these circumstances, these metals will likely experience gradual growth, especially after the Federal Reserve finally pushes a stop button.
It's essential to remember that successful trades in commodity futures or any other assets require conducting your own analysis.