Last year, the demand for gold and silver dropped significantly, aided by factors such as the tightening of the Fed policy and the rapid growth of the American economy. As a result, precious metals showed a negative price trend for a long time. Silver showed itself much worse compared to the yellow metal, which was mainly caused by strong volatility.
The trend may change this year. As a matter of fact, an increase in short-term interest rates no longer leads to the formation of new lows in precious metals quotes. Perhaps the lion's share of the negative is in the prices.
It is worth noting that silver is widely used for industrial purposes, along with jewelry production and investment. If we talk about gold, the main demand is investment. In silver, there is now a physical metal deficiency, which is covered by accumulated reserves, which tend to decrease. Speculative sales at $ 14-16 are met with resistance from real demand, as well as ETF-funds, which vigorously increases investments in physical metal. As for gold, it is about $ 1150-1200 per ounce.
If the yellow metal trend keeps growing, then silver is under pressure. In recent years, many of the world's central banks, primarily in the Russian Federation and China, are actively replenishing gold reserves in order to diversify their reserves and reduce dependence on the US dollar. Silver does not belong to monetary metals, and since the middle of last year, it has simultaneously dropped in price together with other industrial metals, in particular with copper. Non-ferrous metal prices collapsed after Washington launched a full-scale trade war.
Now, looking at the positions of major players, we can talk about the great potential for further purchases of gold and silver. Recently, speculative sales have been holding back high demand from hedging participants who use low prices to make physical purchases, as real demand for precious metals began to increase.
Having passed the historical lows, the net long position began to grow the funds to close the shorts and increase purchases. This year, the Fed is expected to soften the policy due to concerns about the slow growth of the country's economy and sales in the stock market.
Since it is expected to reduce interest rates on medium and long-term US government bonds, the dollar will weaken against the basket of currencies and precious metals will go up. The target for gold in the new year is $ 1350-1400 per ounce and an ounce of silver will be valued at $17.5-18.
Palladium is more precious than gold.
A separate topic deserves palladium, which continues to rally and remains in the spotlight. Thus, on January 4, for the first time in its entire history, it was valued above $1,300 per ounce, after it overtook gold in value a month ago.
The rise of palladium is due to fundamental factors such as the positive news about the US-PRC trade negotiations and comments by Jerome Powell.
In the next 12 months, the fundamental picture for palladium should remain positive. The growth rate of demand prevails over the supply.
Data from the World Platinum Investment Council (WPIC) showed that China accounts for 26% of the global demand for metals from the platinum group. Increased demand from consumers will continue to maintain a palladium deficit in the market.
The material has been provided by InstaForex Company - www.instaforex.com