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Smooth Sailing Ahead For Gold, Silver, Platinum - TD Securities

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Smooth Sailing Ahead For Gold, Silver, Platinum — TD Securities

(Kitco News) - More Federal Reserve rate hikes and escalating trade war tensions mean more volatility for the precious metals market, but prices are likely to move up in the latter half of the year, according to TD Securities.

“Gold, silver, and platinum should be well supported and follow a smoother upwards path starting sometime in the latter part of 2018,” TD Securities head of commodity strategy Bart Melek said in a report published on Thursday.

Volatility will be natural, but transitory, this year, noted Melek, pointing to at least three more rate hikes in 2018.

“Considering that the market is expecting three Fed Funds rate increases this year, with a sizable contingent of market watchers still calling for four hikes and arguing for a shift in the dots to reflect that expectation, it is quite likely that the precious metals complex will be volatile for much of the year,” he wrote.

TD Securities does not project a hawkish Fed this year, adding that the central bank will “tread carefully” in light of a brewing trade war, especially considering the latest U.S. President Donald Trump’s steel and aluminum tariffs.

“A ‘go-slow’ approach on the part of the Fed as we approach the end of the US tightening cycle – a resulting weakening of the USD as other central banks such as the European Central Bank (ECB) ready themselves to remove the extraordinary monetary accommodation – should be quite supportive of gold and friends,” the report said.

Melek sees gold prices rising towards $1,400, silver to $19 and the platinum group metals (PGMs) to above $1,150 by the end of next year.

“The reasons for this optimism is predicated on our view that real and nominal interest rates will not rise to restrictive levels, industrial and physical demand should improve along with a robust global economy, while a weaker USD and sliding mining supply should also help,” Melek said.

Dwindling precious metals supply, especially in the case of silver and platinum, and declining gold reserves will work to support prices long-term, the report pointed out.

“Given that [there are] few funded large projects are on the horizon, there is likely to be a scramble in the next few years to fund the supply expansions required to balance future demand,” Melek noted. “With the current mine project pipeline unlikely to keep up with projected physical demand growth, there also are likely to be upside risks to our price forecast and a meaningful interest in new capacity investment.”

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