Metals Focus has released its "October Precious Metals Monthly Report," highlighting that due to strong U.S. employment data in September, financial markets have reduced expectations for interest rate cuts. It is currently anticipated that the Federal Reserve is more likely to lower rates by 25 basis points at each of the November and December policy meetings. The continuous reduction of U.S. interest rates should lead to lower U.S. Treasury yields, and the narrowing interest rate differential between the U.S. dollar and other major currencies will continue to suppress the dollar, thereby benefiting precious metals. As concerns over a U.S. economic recession gradually recede, which could lead to further stock market gains, the trend towards portfolio diversification is also expected to continue, supporting the strength of gold.
Concerns over U.S. fiscal policy and debt may intensify and will be an important factor affecting market trends. Moreover, even if the most tense situations in the Middle East ease somewhat, it is unlikely to return to a normal state in the foreseeable future. These factors will support investor interest in precious metals through to 2025. It is currently forecasted that gold prices will set new historical highs in the coming months, which will help to boost silver prices.
Macroeconomic Status and Outlook
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In September, the U.S. stock market set new highs repeatedly, with the S&P 500 index rising for the fifth consecutive month. The Federal Reserve's significant interest rate cut of 50 basis points, initiating a cycle of rate reductions, was the main driver of the stock market's rise. After the Federal Reserve's policy meeting in September, market expectations for another 50 basis point rate cut in November have also increased, leading to the U.S. dollar index falling to a one-year low.
Precious metals also benefited from the weakening dollar, with increased safe-haven buying following the recent escalation of geopolitical tensions in the Middle East, providing an additional impetus for the strength of precious metals, particularly gold.
At the end of September, the Chinese government announced a package of radical economic stimulus measures, which propelled the Chinese stock market to its largest increase since 2008. The significant rise in the Chinese stock market helped strengthen the European market and industrial metals, with its spillover effects also benefiting silver.
At the time of this report's release, due to strong U.S. employment data in September, financial markets have reduced expectations for interest rate cuts, and it is currently anticipated that the Federal Reserve is more likely to lower rates by 25 basis points at each of the November and December policy meetings.
Nevertheless, the continuous reduction of U.S. interest rates should lead to lower U.S. Treasury yields, and the narrowing interest rate differential between the U.S. dollar and other major currencies will continue to suppress the dollar, thereby benefiting precious metals.
As concerns over a U.S. economic recession gradually recede, which could lead to further stock market gains, the trend towards portfolio diversification is also expected to continue, supporting the strength of gold.
Concerns over U.S. fiscal policy and debt may intensify and will be an important factor affecting market trends. Furthermore, even if the most tense situations in the Middle East ease somewhat, it is unlikely to return to a normal state in the foreseeable future.The factors mentioned above will support investors' interest in precious metals until 2025. It is currently anticipated that gold prices will set new historical highs in the coming months, which will help to boost silver prices.
Current Status and Outlook of the Gold Market
Due to the Federal Reserve's larger-than-expected interest rate cuts, coupled with the escalating tensions in the Middle East, gold prices continued to rise in September. After reaching a historical high of $2,685 per ounce on September 26th, the price of gold experienced a slight pullback and was trading near $2,650 per ounce at the time of writing this report.
MetalsFocus has significantly raised its gold price forecast. The reasons for the increase include the growing expectation that the United States will accelerate interest rate cuts and the increasing desire of professional investors to diversify their portfolios, which often reflects their belief that stock prices are too high or their concern about the poor prospects of U.S. government debt.
In this context, investors have been buying up large amounts of gold whenever there is a price correction in recent months, significantly pushing up the base price of gold. Equally important is the fact that despite gold prices setting new historical highs, institutional investors are not very willing to sell or short gold.
The continuous rise in net long positions in gold futures held by managed funds at CME (Chicago Mercantile Exchange Group) highlights the high enthusiasm of investors for gold. Although the net long positions (in terms of contracts) were still 20% lower than the historical peak at the beginning of October, the total value of positions has set new historical highs since July. Similarly, funds continued to flow into gold ETPs (Exchange Traded Products) in September, marking the fifth consecutive month of inflows.
The steady purchase of gold by global official sectors has also helped to push up gold prices, and this trend is expected to continue in the foreseeable future. Although the pace of purchases has slowed so far this year, the net purchase volume in absolute terms is still at a historical high.
Looking ahead, it is expected that the macroeconomic and geopolitical environment will continue to support gold investment until 2025. Even if the pace of interest rate cuts by the Federal Reserve is slower than expected in the coming months, real yields should continue to decline.
Furthermore, given the growing concerns about U.S. debt levels, escalating tensions in the Middle East, and high stock prices, investors should have reasons to pursue portfolio diversification, which will attract funds into the gold market. Investors seeking to preserve their wealth will further boost gold prices.
However, MetalsFocus believes that once gold prices reach the $3,000 per ounce mark in the first quarter of 2025, there is doubt whether they can continue to rise, as the expectations for future interest rate cuts by early 2025 will have essentially been reflected in the gold price. At that time, being long on gold may be too crowded. Therefore, it is expected that gold prices may start to fall afterward, but considering the many macroeconomic and geopolitical uncertainties, gold prices may still remain high by the end of the third quarter of 2025.Due to high gold prices, coupled with poor consumer confidence, the demand for gold jewelry in China remained weak in September. This was also reflected in the low wholesale business during the Shenzhen Jewelry Show in September. Retailers' stockpiling for the upcoming Golden Week (traditionally the second largest jewelry retail season in China) was also limited. To reduce operating costs, some jewelry exhibition halls and processing manufacturers increased the number of employee vacation days.
In September, the demand for gold from Indian consumers slowed down due to the rise in gold prices to a record high, coupled with the arrival of the inauspicious 15-day mourning period for the deceased. Retailers were also cautious about restocking at such high gold prices. It is expected that gold prices will continue to strengthen, which will continue to suppress gold demand during the Diwali festival (October 31 this year).
After demand began to rise in late August, the demand for physical gold in Turkey continued to strengthen in September, especially in the second half of the month, as the continuous rise in gold prices stimulated interest in buying gold. The strong demand, coupled with limited gold supply (due to the government's monthly import quota of 12 tons), led to the local gold price premium over the international gold price rising from $40-50 per ounce in late August to $60-80 per ounce in late September, and further accelerated to around $130 per ounce in early October. In contrast, due to the international gold price rising to a record high, the Dubai market gold price was discounted by $4-5 per ounce against the international gold price during the same period.
In terms of mineral gold supply, AngloGold Ashanti signed an agreement to acquire Centamin Mining in September, with a transaction value of $2.5 billion. According to the acquisition agreement, AngloGold Ashanti will gain control of Centamin's Sukari gold mine in Egypt. It is expected that this acquisition will increase AngloGold Ashanti's annual gold production by about 450,000 ounces, to about 3 million ounces.
Price forecast risk factors: In terms of upside risks for gold prices, the continuous deterioration of geopolitical situations may significantly increase the inflow of safe-haven funds, thereby pushing up gold prices. In terms of downside risks, rising inflation or easing geopolitical tensions may trigger profit-taking by gold investors. A significant stock market correction may also be bearish for gold, as investors may rush to sell liquid assets to cover stock market losses.
Current situation and outlook of the silver market
After failing to break through the $30 per ounce mark again in late August, silver prices weakened in early September, fluctuating within the $28-29 per ounce range for the first ten days. Then, silver prices continued to rise until the end of the month, and the upward trend continued into early October. After climbing to a 11-year high of $32.96 per ounce on October 4, silver prices fell, and at the time of writing this report, they were below $32 per ounce.
In early September, silver performed worse than gold due to market concerns about the Chinese economy (extending to industrial metals), while gold benefited the most from geopolitical tensions and portfolio diversification strategies.
During the second half of September, silver rebounded strongly, with its monthly increase ranking first among all precious metals. This partly reflects the increased interest of tactical investors in silver due to the gold/silver price ratio approaching 90:1 at the end of August and the beginning of September, making silver appear undervalued. More importantly, as the Chinese government unexpectedly introduced the most aggressive economic stimulus measures since the COVID-19 pandemic at the end of September, the sharp rebound in industrial metal prices benefited silver.
The breakthrough of silver prices through the consolidation range prompted more short-term investors to follow the trend and buy. On September 24, the net long position of silver futures held by CME managed funds reached a two-year high, and then only slightly retreated. Global silver ETPs also achieved a moderate inflow of funds, and by the end of September, the total holdings had risen to a two-year high.Looking ahead, to reflect the driving effect of rising gold prices, the silver price forecast has been slightly increased since the release of the last monthly report. Despite recent declines, the current gold/silver price ratio is still close to 83:1, which is at a high level. At the same time, the current silver price is still far below its historical peak. Considering these factors, there is still ample room for speculative capital inflows into the silver market.
Similar to the case with gold, the silver price rise is also difficult to sustain after entering the second half of 2025, as the interest rate reduction process should have been largely completed by then. It should also be emphasized that the gold/silver price ratio is expected to slightly decrease in the later period of 2025, which is different from the historical norm where silver usually underperforms gold during the downward trend of precious metal prices. This judgment is based on the assumption that a continued shortage in the silver market supply may attract some long-term investors.
Continuing the trend of the previous months, the retail investment demand for silver in Western countries in September remained weak, reflecting a decline in investors' demand for safe-haven assets and a market that is nearly saturated after extremely high purchase volumes during the 2020-2022 period.
After the government reduced import tariffs, the demand for silver in India briefly rose, but due to the rebound of international silver prices, which pushed domestic silver prices close to the levels before the tariff reduction, demand fell again in September. With slowing consumer demand, retailers are not very willing to replenish their inventory at the current price levels. Looking ahead, similar to the case with gold, if the silver price continues to rise, the amount of silver purchased by consumers during this year's Diwali festival may be affected.
In terms of industrial demand for silver, the number of orders received in the third quarter of 2024 was lower than expected, forcing major silver end-users to focus on controlling inventory levels. In recent years, the photovoltaic industry has been the main force driving the growth of industrial demand for silver, but the current slowdown in demand is clearly visible. Information from Chinese photovoltaic product manufacturers shows that due to the possible postponement of some large domestic projects, and the still weak demand overseas, especially in Europe, the visibility of orders for the fourth quarter of this year is unclear. There are also some bearish factors in other parts of the world. In October, the United States announced that it would implement anti-dumping measures against solar cells imported from some Southeast Asian countries, and the decision to further increase tariffs has increased uncertainty. The Indian government's implementation of the "Approved Model and Manufacturer List" system essentially constitutes a barrier to importing photovoltaic products from China, which has affected the installation of photovoltaic power generation capacity in the country. Since April 2024, this import control guide has been applicable to the import of photovoltaic modules and will be applicable to the import of photovoltaic cells from April 2026.
On the supply side, Cordairen Mining Company announced that it will acquire SilverCrest Metals Company for a consideration of $1.7 billion. After the completion of the acquisition, Cordairen Company will incorporate SilverCrest's Las Chispas mine in Mexico, owning a total of five operating mines in North America. The company currently estimates that the silver and gold production in 2025 will be 21 million ounces and 432,000 ounces, respectively.
Price forecast risk factors: Like gold, the main risk factors for the upward movement of silver prices include increased geopolitical risks and faster-than-expected interest rate cuts by the Federal Reserve. If China introduces more radical economic stimulus measures, it will inject additional impetus into boosting investors' confidence in industrial metals, which is beneficial for silver. On the downside, the current support measures may not be sufficient to drive significant economic growth in China. Once pessimistic expectations about the Chinese economy re-emerge, they may suppress the prices of industrial metals, thereby dragging down the silver price.
Platinum Market Current Status and Outlook
The opening price of platinum in September was $928 per ounce, and it quickly fell to the monthly low of $901 per ounce on the 4th. Continuing the range-bound trend, platinum prices found support at the $900 per ounce level and rose to around $1,000 per ounce before falling back. Like other metals, platinum prices rose after the Federal Reserve announced a 50 basis point interest rate cut on September 18th, and touched the monthly high of $1,019 per ounce on the 26th, after gold prices hit a historical high. However, platinum prices once again failed to hold above $1,000 per ounce, and ended the month at $981 per ounce. In early October, platinum prices continued to decline slightly.
The average price of platinum in the third quarter of 2024 was $964 per ounce, $14 higher than the previous forecast. Given the continued shortage of platinum supply, the continued increase in China's platinum imports, and the stable demand for fossil fuel vehicles, the platinum price forecast for the fourth quarter of 2024 to the fourth quarter of 2025 remains unchanged.In September, the total holdings of global platinum Exchange Traded Products (ETPs) decreased by 136,000 ounces (a 4% drop) to 3.22 million ounces, returning to the level seen in April of this year. Although the total holdings have increased by 5% year-to-date, they have fallen by 10% from the annual high of 3.58 million ounces reached in mid-June. Similar to other significant changes in holdings this year, the reduction in September was primarily due to European funds, which sold off 131,000 ounces. This was a major contributor to the decline in global platinum ETP holdings. Unlike the previous months when platinum prices touched $1,000 per ounce, prompting investors to take profits, the selling period in September was concentrated between the 11th and 17th, possibly due to investors anticipating a rate cut by the Federal Reserve.
At the beginning of September, the net short position of platinum futures held by managed funds at the CME reached a six-month high of 465,000 ounces. However, the position quickly reversed, and by the end of the month, the net long position stood at 753,000 ounces. The shift from a net short to a net long position, with a change of 1.2 million ounces, reflects the scale of speculative activity in an environment of fluctuating platinum prices. The long positions reached their peak as the price approached $1,000 per ounce, while the short positions peaked when the price approached $900 per ounce.
As platinum prices fell to around $900-950 per ounce for the first time since April this year, the combined net imports of platinum into Mainland China and the Hong Kong Special Administrative Region in August rose to 436,000 ounces, a three-year high. By the end of August, the total imports for the year stood at 1.74 million ounces, up 34% from the same period in 2023, but 17% and 14% lower than the imports in 2021 and 2022, respectively. The increase in Chinese platinum imports in August could lead to a tightening of the forward curve, increasing the cost of platinum leasing.
Shifting focus to the automotive industry's demand for platinum, BMW announced the successful completion of global testing for the BMW iX5 Hydrogen Fuel Cell vehicle, with mass production set to begin in 2028. The development of hydrogen fuel cell technology for light vehicles is favorable for a strong future demand for platinum. It is estimated that the total demand for platinum in the automotive industry in 2024 will be 3.24 million ounces, with the demand for hydrogen fuel cell vehicles still very low (accounting for less than 1% of the total demand for light vehicles).
In September, the U.S. Congress discussed the National Defense Authorization Act for Fiscal Year 2025, with key meetings including the House Armed Services Committee meeting on September 16 and the Senate's review meeting. The focus was on strengthening the domestic supply chain for critical minerals (including platinum). The legislation aims to promote the independence of the U.S. mineral supply chain, with specific measures including supporting the development of recycling technologies, improving the mining permit system, and ensuring international cooperation. These measures are expected to increase the stock and procurement of platinum group metals used in military technology fields, maintaining their status as strategic national security resources.
The recycling supply of platinum in 2024 is expected to grow weakly, with only a 3% increase year-on-year to 1.18 million ounces. Part of the reason is that some recyclers are hoarding stocks, but the main reason is the reduction in the supply of scrapped vehicles. Given regulatory uncertainties, consumers may be less willing to scrap old vehicles and buy new ones. Changes in government targets for vehicle electrification and fluctuating emission targets have led many consumers to be uncertain about whether to choose electric vehicles immediately or wait until regulatory regulations are clearer. Faced with the constant changes in the automotive market, consumers are hesitant and delay making purchasing decisions. It is expected that the market will return to normal in 2025, and the corresponding recycling supply of platinum is expected to grow by 15% year-on-year.
In terms of mining platinum supply, Anglo American has begun to reduce its stake in Anglo American Platinum, disposing of 13 million shares, which is approximately 5% of the total issued common stock of Anglo American Platinum. The reduction in shares aims to increase the free float of Anglo American Platinum's stock in South Africa, in preparation for the company's split.
Price forecast risk factors: If interest rate cuts can boost automotive demand, the supply of scrap automotive catalysts may increase, which could suppress platinum prices. Although platinum prices have not yet followed the upward trend of gold prices, the decline of gold prices from historical peaks may still suppress the bullish expectations for platinum prices.
Palladium opened at $968 per ounce in September, fell to $907 per ounce on the 6th, and then found support at the $900 per ounce level, following a similar trend to platinum. On September 11th, palladium prices broke through $1,000 per ounce and stood above the 200-day moving average. Although palladium prices had briefly stood above the 200-day moving average twice earlier this year, this was the first significant breakthrough since October 2022, injecting momentum into the upward movement of palladium prices. Palladium investor sentiment improved, partly due to expectations that the Spanish-Stillwater Mining Company's North American mines would cut palladium production, which was officially announced on September 12th, further boosting palladium prices. With the help of short squeezes in the futures market, palladium prices reached $1,125 per ounce on September 18th, a new high since December 2023 (when concerns about disruptions to Russian palladium supplies triggered a similar short squeeze). At the end of the month, palladium prices closed at $1,004 per ounce, the first time since March of this year that the closing price has stood above $1,000 per ounce, and it has remained above this level in early October.
Like platinum, the forecast for palladium prices in the third quarter of 2024 is only slightly lower than the actual level of $970 per ounce. It is expected that there will be a significant shortage of palladium supply this year, and it will also reach 377,000 ounces in 2025, so the judgment that palladium prices will rise slightly remains unchanged.At the beginning of September, the transaction price of palladium was around $40 higher than that of platinum, but on September 9th, it briefly switched to a discount against platinum. The palladium price found support at this level, and on September 18th, the premium over platinum soared to nearly $140. Currently, both palladium and platinum prices are around $1,000 per ounce, in a state of parity.
In September, the total holdings of global palladium ETPs decreased by 4% (a reduction of 34,000 ounces) to 725,000 ounces. Like platinum, this also returned to the level of April this year. Although there was a decline in September, the total holdings for the year to date have still increased by 22%. The holdings of North American funds for the year to date have risen by 33%, buying when palladium prices were low, but in September, the average price of palladium rose to $1,019 per ounce, setting a new high for the year, and then profit-taking, which was the main force affecting the changes in the total holdings of global palladium ETPs in September and for the year to date. The current holdings of South African funds are only 11,000 ounces, less than 1% of the peak level in 2015 (1.39 million ounces), and also down 68% from the high point in May this year (33,000 ounces).
Due to the low palladium prices throughout the month stimulating imports, the combined net imports of palladium to Mainland China and the Hong Kong Special Administrative Region in August reached 221,000 ounces, 56% higher than the average monthly imports so far this year, setting a new high since November 2023. Similar to the situation with platinum, the increase in Chinese imports may lead to a tight supply in the palladium market, driving up leasing costs.
At the beginning of September, CME managed funds held a net short position of 1.278 million ounces in palladium futures. Subsequently, the rise in palladium prices triggered a short squeeze, where a sharp increase in the price of an asset forces short positions to cover and close their positions. The short squeeze led to a 37% decrease in total short positions and halved the net short positions, ending the month at 600,000 ounces, the lowest net short position since December 2022 (when a short squeeze also occurred). However, some short positions were re-established at the beginning of October.
It is estimated that the weighted average price of the current net short positions in palladium is below $1,000. In the past, when palladium prices rose, investors, due to their short positions being in a floating profit state, were more capable of guarding against losses. However, a larger proportion of investors are now in a floating loss state, and therefore more likely to quickly cover and close their positions to protect profits or limit losses, which will lead to increased volatility in palladium prices.
It is estimated that the global demand for palladium in the automotive catalyst sector in 2024 will be 8.3 million ounces, a year-on-year decrease of 1%. Although the market share of pure electric vehicles continues to rise and the production of internal combustion engine vehicles is declining, the growth in hybrid vehicle production limits the reduction in the demand for palladium in the automotive industry.
In September 2023, China began to implement regulatory policies for automotive recycling. The new regulations require companies to be qualified and to record detailed information about the recycled parts. Last year, after the decline due to regulatory restrictions, the volume of automotive recycling in China rebounded, which should enable a 51% increase in domestic palladium supply this year, to 240,000 ounces. It is expected that the global palladium recycling supply will grow by 2% in 2024, to 2.12 million ounces.
In terms of mineral palladium supply, Stillwater Mining Company has decided to reduce the output of its East Boulder mine and suspend production at its Stillwater mine in Montana, mainly due to the low prices of platinum group metals affecting the financial feasibility of the mine. The company will lay off about 700 employees and reorganize its operations, focusing on mining high-grade ores at the East Boulder mine to stabilize its financial situation. It is expected that due to the restructuring, the combined output of palladium and platinum from the Stillwater mine (with palladium accounting for 77%) will decrease by 200,000 ounces from 2025 onwards.
Price forecast risk factors: The high short positions in CME palladium futures imply a higher likelihood of a short squeeze, which could trigger a sharp increase in palladium prices.
Current situation and outlook for the rhodium marketContinuing the trend from earlier this year, there was little change in rhodium prices in September. Since April, rhodium prices have remained above $4,500 per troy ounce with low volatility. The opening price (selling price) for rhodium in September was $4,700 per troy ounce, and it closed at $4,750 per troy ounce at the end of the month, with a fluctuation range of $4,625 to $4,825 per troy ounce during the month.
MetalsFocus maintains its rhodium price forecast for 2024 unchanged. After a significant drop following a new high in 2022, rhodium prices have now stabilized. It is expected that there will be a substantial supply deficit in 2024, which will continue into 2025 (although the deficit is expected to narrow).
In August, the combined net imports of rhodium to Mainland China and the Hong Kong Special Administrative Region reached 35,000 ounces, a new high since June 2020. As of the end of August, the total imports for the year to date have increased by 58% year-on-year, reaching 180,000 ounces, marking a new high for at least the past five years. Similar to the situation with platinum and palladium, China's rhodium imports have also risen significantly, although rhodium prices have not yet fallen to a level low enough to stimulate speculative buying. This may reflect that the sentiment of participants has already had an impact on the market ahead of the economic stimulus measures introduced by the Chinese government in September.
It is expected that the demand for rhodium in the automotive catalyst sector will decrease by 2% year-on-year in 2024, to 971,000 ounces, similar to the situation with palladium demand. High rhodium prices have prompted automobile manufacturers to significantly reduce their use of rhodium, and this trend is not likely to reverse in the near term.
Thanks to the expansion of production capacity by North American companies, the demand for rhodium in the chemical industry is expected to grow by 42% in 2024, reaching 136,000 ounces. However, it is anticipated that due to the trend of significant expansion in acetic acid production capacity not continuing, the demand will drop by nearly half in 2025, to 73,000 ounces. In other sectors of the chemical industry, the demand for rhodium in electroplating continues to rise, and the demand from nitric acid producers remains stable.
It is forecasted that the demand for rhodium in the glass industry will increase by 56,000 ounces in 2024. Over the past four years, demand has decreased in 2020, 2022, and 2023, with a net reduction of 69,000 ounces in 2023. The trend of platinum replacing rhodium in platinum-rhodium alloys has ended, and the corresponding demand for rhodium is no longer decreasing. The expansion of China's LCD production capacity has driven growth across the industry, which is a significant factor contributing to the supply deficit of 186,000 ounces this year. This supply deficit will prevent further declines in rhodium prices. As the expansion of LCD production capacity is expected to slow down after 2025, the demand for rhodium in the glass industry will drop to 18,000 ounces.
Price forecast risk factors: Although the import volume of rhodium to Mainland China and the Hong Kong Special Administrative Region has increased, if purchases are proven to be mainly speculative, a large-scale sell-off could significantly disrupt the rhodium market, leading to a sharp drop in rhodium prices, similar to what occurred during 2022-2023.