HSBC: Platinum To Avg. $1,055 In 2018; Palladium $975
The bank looks for platinum to average $1,055 an ounce in 2018 and palladium to average $975. HSBC said palladium may well maintain its premium in the near term, before platinum regains the upper hand later in the year.
Palladium has been the strongest-performing precious metal in 2017, helped by what analysts describe as a large supply deficit. Prices this fall topped those of platinum for the first time since 2001. Both metals are used for catalytic converters, with palladium going into cars with gasoline-powered engines popular in the large auto markets of the U.S. and China, while platinum is used for diesel-powered vehicles such as those popular in Europe.
Platinum has been held back by concerns over diesel-powered vehicles losing their share of the global car market, as well as weak Chinese jewelry-related demand and negative investor sentiment, HSBC said.
"We regard platinum as being oversold and look for a recovery in prices," the bank said. "Some of the supportive factors, such as limited supply and a potential for increased investment demand, are still in place, but have yet to buoy the market. That said, low prices have crimped mine investment, and limited production should eventually support prices.
"Concerns of loss of market share in the auto sector, while valid, may be exaggerated. Platinum is likely to benefit from its association with gold as well as any rise in demand for hard assets linked to increased volatility or financial market weakness. Low prices may aid a recovery in China jewelry demand while North American and Indian demand looks set to expand."
HSBC said it looks for palladium prices to remain firm due to supply/demand fundamentals. However, the bank also said prices are already historically high, thus making further gains difficult and likely to require ongoing investor demand.
"Our supply/demand model suggests a wide structural deficit, which is likely to keep palladium prices high longer term," HSBC said. "We expect prices to remain strong based on the twin pillars of limited mine supply and ongoing auto demand.
"That said, the market has struggled to stay above the key $1,000/oz level. Investor demand has figured prominently in the rally and any reduction in this interest may lead to corrections as speculative investors take profits."
HSBC projected the platinum market supply/demand balance will be in deficit by 191,000 ounces in 2018 after a 115,000-ounce surplus this year. The bank called for a palladium deficit of 1,151,000 ounces next year after a deficit of 680,000 ounces this year.