Range : $1,550 - $1,800
Average : $1,736
We see the long term gold bull run remaining very much intact, but the conviction and patience of gold investors may be tested in 2013. Against the backdrop of an improving macro-economic environment, particularly in the United States, we see dollar firmness and a fading of the fear trade providing a drag on rising gold prices. For a market used to a 17% y-o-y gain, a single digit percentage increase may feel like a bear market. In essence, we see 2013 looking surprisingly like 2012 — that is modest price gains, declining volatility and extended periods of range trading. The caveat to this is the U.S. debt ceiling issue, which arises in March 2013 — a fudged outcome could of course generate far higher outcomes than shown above. The key issues will be ongoing Central Bank purchases and growth in investment demand, this being partially offset by a reduction in speculator positions and moderately lower Indian demand as import duties are raised again. Broadly speaking, though, gold will continue to be seen as cheap insurance for those concerned with tail risk and is a high quality asset that holds value amidst competitive devaluations of currencies.
Range : $26.00 - $35.00
Average : $31.16
We expect some softness in silver prices during 2013, which, after a stellar 10-year run, looks vulnerable as the fear trade evaporates and speculators look to reduce their positions commensurately. Silver has consistently been the top performer within the commodity complex but is looking increasing like an aging rock star — a little past its best. We forecast a weak start to the year on U.S. dollar firmness before good demand from industrial applications as global IP picks up, coupled with re-stocking in the second half. With its recent history of price spikes, there is a danger that sharp rises will be seized upon by producers as an opportunity to sell forward, effectively capping the rallies. With primary mine production continuing to rise to new record highs, the onus is increasingly on the silver bull's to prove the case.
Next page: Platinum and Palladium
Range : $1,545 - $1,895
Average : $1,711
The prospect of further supply-side disruptions from South Africa from the Unions, coupled with ongoing robust demand from the auto sector looks likely to ensure that platinum prices remain firm in 2013. If, as expected, a number of South African mines go onto care and maintenance, then this potentially could exacerbate supply tightness further. With an improving economic backdrop giving rise to higher global IP — and in particular the growth in HDD catalyst demand for commercial vehicles — this gives scope for strong demand in a supply constrained market, setting the scene for potentially far higher prices than those that we have forecast here.
Range : $675 - $820
Average : $787
We expect palladium to move into a supply deficit of about 450,000 ounces in 2013 as production is mothballed in South Africa, which should ensure that prices remain firm in 2013. As such, we anticipate that palladium will be the best performing commodity in the year ahead. The key issue determining the palladium price outlook as always will be the perennial question over Russian metal sales from stocks and from production. In the case of the former we think that the stockpile is already much depleted and for the latter, given that margins are already slim, there is a distinct chance that Russian metal may be withheld from the market. As with platinum, the price risk is very much to the upside as high production costs have placed a floor under this market.