(Kitco News) Fundamentals no longer matter as much for the precious metals outlook, with rate hike expectations and concerns around energy having a bigger impact on all metals prices, said S&P Global.
"Metals prices face macroeconomic headwinds. September was characterized by more significant interest rate hikes to combat inflation in major economies as central banks became increasingly concerned by the possibility of a global economic recession in 2023," said Aude Marjolin, associate commodity analyst at S&P Global Commodity Insight.
Next year's gloomy macroeconomic picture is the one weighing on metals, not the fundamentals. And persistently higher inflation is not giving the Federal Reserve any room in the short term to change or pause its tightening course.
"On the cards is the possibility of further interest rate hikes in November, should the Fed strive to meet its 2% inflation target rate," Marjolin wrote in the latest price forecast from S&P Global. "The European Central Bank and the central banks of Norway, Sweden and Switzerland also raised rates in September, as inflation in the eurozone reached 10% — the highest since the inception of the euro."
In the gold outlook, S&P Global introduced a slight update to its consensus price forecasts, with an average upgrade of 0.4% annually through 2026. Marjolin mentioned gold's role in an investment portfolio during economic uncertainty and rising geopolitical risks.
S&P Global sees gold averaging this year at $1,842 an ounce, next year at $1,800, 2024 at $1,769, 2025 at $1,757, and 2026 at $1,753. "Gold has been the unexpected loser of the current macroeconomic environment, with its safe-haven status in direct competition with the U.S. dollar," Marjolin noted.
In its silver outlook, S&P Global has downgraded its prices for the next two years but upgraded its longer-term projection. The latest consensus forecast is now down by an average of 2.3% annually through 2026. "Despite the expected near-term weakness, the silver price is expected to remain broadly stable through to 2026, averaging $22.34/oz," Marjolin said.
S&P Global looks for silver to average this year at $22.50, next year at $22.20, 2024 at $22.31, 2025 at $22.21, and 2026 at $22.47. "With most industrial activity pressured by the weakening economy, demand for silver will likely remain subdued, and so will the price," Marjolin added.
Price forecasts for palladium and platinum were downgraded by about 3% annually through 2026, with S&P Global citing the current macroeconomic environment as weighing on price expectations for palladium and platinum. The outlook sees platinum averaging $1,282 an ounce and palladium at $1,436 in 2026.
