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Platinum was the top precious metal in 2022, here's how the others did

Kitco News

(Kitco News) Precious metals had a very mixed performance in 2022. And if not for the last quarter of the year, the results would have been very different.

The best precious metals performer of 2022 was platinum, up nearly 11% on the year. Next in line was silver, up nearly 3% in 2022. Gold ended the year flat. And palladium was the biggest loser, down around 6% in 2022.

"Thanks to an impressive recovery in the final quarter, the gold price ended the year at virtually the same level it began it. Silver and platinum achieved year-on-year gains of 2.8% and just shy of 11%, respectively," said Commerzbank analyst Carsten Fritsch.

Spot platinum began 2022 at around $965 an ounce and ended at around $1,068 an ounce. Spot silver opened last year at $23.28 an ounce and ended the year at $23.93 an ounce. Spot gold kicked off 2022 at around $1,828 an ounce and ended it at just above $1,822 an ounce. And spot palladium started off at about $1,902 an ounce and ended 2022 at around $1,790 an ounce.

"Sizeable fluctuations were seen during the course of the year: the difference between the yearly high and the yearly low was around $450 or 28% in the case of gold, $9.4 or more than 50% in the case of silver, and $360 or 44% in the case of platinum," Fritsch described. "The price range for palladium was especially wide at nearly $1,800, the yearly high – which was also a record high – being more than twice as high as the yearly low."

The times each precious metal hits its yearly lows also differed. Palladium saw its biggest losses towards the end of the year, while gold, silver and platinum saw their yearly lows in September. The highs were reached around the same time for all four precious metals — at the beginning of March, which was in reaction to Russia's invasion of Ukraine.

Why platinum?

The World Platinum Investment Council (WPIC) said in its latest quarterly report that the global platinum market is projected to be in a deficit of 303 koz in 2023. Global platinum demand is said to rise by 19% (to 7,770 koz) while supply edges up only by 2% (to 7,466 koz).

The WPIC cited supply constraints and increased bar and coin demand, revising the market surplus forecast for 2022 down by 17% to 804 koz.

"The platinum market is forecast to be in deficit after two consecutive years of significant surpluses. This reflects supply that remains well below pre-pandemic 2019 levels and demand growth, despite the unfavorable economic outlook," said World Platinum Investment Council CEO Trevor Raymond. "Platinum [is] in a somewhat unique position versus other commodities in that demand is forecast to continue to grow, despite the recessionary outlook."

The WPIC's report revealed that the automotive platinum demand was up 25% year-on-year in the third quarter of 2022.

"A combination of higher passenger vehicle production numbers, tighter emissions legislation for HDVs in China and India, as well as growing substitution of platinum for palladium will see a 12% (+329 koz) expected increase in platinum demand this year, to 2,964 koz," the report said.

Automotive demand in 2023 is expected to increase at a similar pace as in 2022, up 11% to 3,288 koz.

Another boost for platinum prices could be wage pressure and power constraints at mines in South Africa, the world’s number one producer of platinum.

Obstacles for precious metals in 2022

The biggest macro hurdle for precious metals in 2022 has been a historic tightening by the Federal Reserve, which saw the most rapid hiking pace since the early 1980s. Overall, rates climbed by 425 basis points in 2022, rising to a range between 4.25%-4.5%.

"In view of the considerable headwind generated by the pronounced rate hikes implemented by central banks, in particular the Fed, last year's performance of the gold, silver and platinum prices was thus remarkable," Fritsch said.

And the last quarter of the year was so favorable for precious metals because markets started to price in a Fed pivot next year.

During the last meeting of the year, the Fed slowed to a 50 basis point increase but remained very firm in its battle to bring inflation down, warning markets that rates are not at a restrictive-enough level and will have to stay higher for longer.

"We've raised 425 basis points this year, and we're into restrictive territory. It's now not so important how fast we go. It's far more important to think about what is the ultimate level. And … how long do we remain restrictive? That will become the most important question," Fed Chair Jerome Powell told reporters after the December FOMC meeting.

On the possibility of a soft landing, Powell also noted that the longer the Fed needs to keep rates higher, the narrower the runway becomes. "I don't think anyone knows whether we're going to have a recession or not. And if we do, whether it's going to be a deep one or not, it's just not knowable," he said.

The latest median forecast for next year shows that rates could go up to 5.1%, with the Fed also looking for the real GDP to come in at 0.5% in 2023 and the PCE inflation to slow to 3.1% in 2023.

More rate increases are already priced in by the markets for February and March. But many analysts forecast a pause after that, followed by potential rate cuts towards the year-end. 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.