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The Fundamental Analytics Team Gold prices traded above $2,350 per ounce mark, strengthening after reaching an all-time high ($2,440/ounce). New data showed that the US GDP expanded by 1.3% in the first quarter of 2024, lower than reported in an earlier estimate, while headline and PCE price indices were also revised down. Additionally, initial unemployment claims held above this year’s average to back the slight softening in the labor market, while corporate profits unexpectedly contracted. Markets still show a broad consensus that the Fed will only cut rates once this year, but the session’s economic data release had some adding positions for the central bank to lower rates in September. The odds for a Fed’s ease increased slightly for September, November and December. Meanwhile, the ECB is expected to cut interest rates in June meeting for the first time since 2016, but doubts about further moves beyond June increased after a hotter-than-expected inflation print. Platinum prices were above $1,060 per troy ounce, approaching the 13-month high of $1,100 touched on May 13th as the current macroeconomic backdrop favored investments in precious metals while industrial purchasing remained robust. Furthermore, supply is seen as weak and could not meet the increased demand. The Q1 of 2024 saw total platinum output at the second-lowest level since the World Platinum Investment Council began data collection. Meanwhile, automotive industry demand for the metal was the strongest in seven years. The auto sector consumed a significant 832,000 ounces of the metal in the first three months of 2024 amid slower substitution towards PGM-free vehicles, as electric car taxes rose and investors hesitated to switch to more expensive green alternatives. President Biden also recently announced plans to introduce another hike on levies on EVs from top producer China. Investment demand for the commodity also picked up, with traders hedging against inflationary risks. According to the World Platinum Investment Council, platinum will be in an average annual deficit of 500,000 ounces until 2028. Palladium futures have returned to 2018 levels, retreating lower -31.5% compared to the same period last year, amid a significant undersupply in 2023, with a deficit of 1.017 million ounces (which is about 9.8% of the total demand). The price decline is attributed to industrial consumer destocking, as surging prices in 2022 led to heavy stockpiling, and with the subsequent price fall, perceived supply risks diminished, prompting the destocking activity. Nevertheless, demand for palladium showed an unexpected increase of nearly 4% y/y, bolstered by uses in auto-catalysts and growing investment demand. The production of gasoline vehicles, which climbed by 9% y/y to 68.7 million units, has substantially increased the demand for autocatalyst platinum group metals. This surge in vehicle production pushed the demand by more than 900k ounces to nearly 13.1 million ounces, marking the second-highest level ever recorded, with the peak previously reached in 2019. Platinum was the primary beneficiary of this trend, although palladium demand for auto-catalysts also rose by almost 300k ounces. |
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Figure 1: Metals contract ratios, front-month contracts |