Commerzbank: Little Potential For Platinum Recovery; Palladium To Ease In 2H
(Kitco News)- Commerzbank sees limited potential for platinum prices to recoverin 2018 and looks for a fall in palladium in the second half of the year.
Analysts see an “oversupplied” platinum market this year anda smaller deficit in palladium, they said in an outlook report releasedWednesday.
Analysts see platinum averaging $925 an ounce in the secondquarter and then $975 in the third and fourth quarters. Palladium was forecastto average $975 in the second quarter but $950 in the third and fourthquarters.
As of 9:55 a.m. EDT, spot platinum was at $939.40 andpalladium was at $974.30.
The main industrial use for both metals is catalyticconverters in automobiles. Gasoline-powered vehicles use palladium, whilediesel-powered ones require platinum.
In the case of platinum, Commerzbank looks for the metal totick modestly higher in the second half of the year largely on the coattails ofgold rather than its own supply/demand fundamentals.
“Given the falling demand for diesel cars in Europe, theheadwind for platinum is likely to continue, slowing the demand for platinumfrom the automotive industry, especially as more platinum is being recoveredfrom old catalytic converters at the same time,” Commerzbank said.
Analysts said jewelry demand for platinum is expected to“stabilize at best.”
“Only investment demand could ensure that the platinummarket does not again show a supply surplus,” Commerzbank said. “Reliablepredictions are difficult here given the frequently opposite direction of ETF[exchange-traded-fund] and bar demand. That said, a strong impetus from bardemand, as in 2015 and 2016, can only be expected if the platinum price fallssharply or the yen strongly appreciates.
“In our opinion, the platinum price is unlikely to developits own strength but essentially follows the gold price.”
Analysts look for gold to average $1,300 in the secondquarter but then rise to $1,350 in the third and fourth quarters. Silver is seenaveraging $16.50 in the second quarter, $17 in the third and $18 in the fourth.
“Next year, platinum should be pulled up by gold to anaverage of $1,100 a troy ounce,” Commerzbank added.
Meanwhile, Commerzbank said it looks for the supply deficit inpalladium to narrow in 2018 due to weakening demand growth and continuing ETFoutflows. Those outflows have hit nearly 200,000 ounces so far this year.
“If the automotive sector [was] to lose momentum, and thereare some signs of this happening, this would noticeably dampen the demand forpalladium,” Commerzbank said. “Furthermore, on account of its industrial use,palladium has a positive correlation with base metals and we expect to see aprice correction there in the course of the year. All these factors shouldweigh on the price of palladium.
“We therefore expect the price to fall to $950 a troy ounceby mid-year. The likely increasing use of palladium in catalytic convertersnext year amid stricter emissions regulations should prevent a further pricefall in the second half of the year. For 2019, we expect a price increase to$1,000 per troy ounce.”
By Allen SykoraFor Kitco News
Follow @AllenSykora
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