SocGen 'Moderately Bearish' On Gold Prices, Prefers Palladium
(Kitco News)- Societe Generale is "moderatelybearish" on gold prices and calls palladium its "preferred precious metal."
In a report released Tuesday,analysts said they look for gold to be at $1,275 in six months. As of 9 a.m.EDT Wednesday, spot gold was 2.5% higher so far in 2018 to $1,334.90 an ounce.
Rising yields will be a headwindfor gold, SocGen said.
"That being said, we think U.S.rate hikes are already priced in for 2018, and ETF [exchange-traded-fund]holdings have been very stable in recent history," the bank said. "On thephysical market, we forecast a 2% decrease in new mine supply for 2017, and seethe trend extending into 2018 and 2019.
"However, falling demand in theform of lower jewelry and coin demand is likely to more than offset thisdecrease. Still, investor flows are, and should continue to be, the mostimportant price driver."
Meanwhile, analysts said they are"neutral" on silver, suggesting current forward prices are "fair valuations" ona six-month basis. Spot metal was at $16.396 an ounce as of 9 a.m. EDT.
"Although supply is contractingand demand is likely to grow at a moderate pace in both 2018 and 2019, thephysical market should still record a small surplus," SocGen said. "Moreimportantly, ETF flows have thus far remained stable. While rising interestrates should prove a headwind, we believe this is already priced in."
Palladium is projected by SocGento be at $1,075 in six months. Spot metal was at $975.45 early in the New Yorkmorning.
"Palladium is our preferredprecious metal, and we see the current price dip as a buying opportunity,"SocGen said. "Given that palladium is widely regarded as the most ‘industrial’metal of the precious-metal complex, and thereby more closely linked to thebusiness cycle, it is not surprising it fell along with equities. Nevertheless,tight physical availability for immediate delivery, backwardated short-datedswap rates and a bullish chart picture are key bullish factors. Given thatsupply is constrained and unlikely to expand, we see the market deficitdeepening this year and in 2019."
Analysts projected the 2018supply deficit in palladium at 1.6 million ounces.
The French bank said it seesplatinum at $1,025 in six months, with an expected 255,000-ounce deficit for2018 supporting current prices. Spot platinum was at $938.20 in early New Yorktrading.
"Jewelry demand also bottomed out in 2017, andtightening emissions regulations in the U.S. and China should further sustaindemand," Societe Generale said. "On the other hand, rising interest rates inthe U.S., easing geopolitical tensions and concerns about European dieseldemand should cap the upside. "By Allen SykoraFor Kitco News
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asykora@kitco.com 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.