Over the past month, precious metal prices have posted decent gains, led by silver. While the technical outlook is improving, investor sentiment remains broadly bearish. This suggests further price upside if speculative demand returns to the market. The macroeconomic outlook should also continue to support precious metals prices as the recent weakness in US economic data is likely to delay the first rate hike by the Fed to September. Overall, we remain positive on all four of the main precious metals but expect the more “industrial” PMs to outperform this year. Since mid-April, precious metal prices have trended higher, led by silver which recorded a 7% return over the period. From a technical point of view, the outlook for precious metals has improved. All four metals are now trading above their 50-day moving averages, with silver also trading above its 200-day moving average. This is generally considered a bullish signal, which could lead to further price rises. The release of disappointing US economic data helped to lift gold and silver prices as the Fed now appears unlikely to start hiking interest rates until September. The technical picture for platinum and palladium is also improving. After trading below both its 50-day and 200-day moving averages for most of the year, the platinum price has recently broken through its 50-day moving average. Meanwhile, since the beginning of April, the palladium price has been on an uptrend and is now flirting with its 200-day moving average. The stronger performance of silver over the past month has prompted the gold/silver ratio to revert towards its long-term average, albeit still trading 11% above it. While Capital Economics is positive on both metals, silver is expected to outperform gold in 2015, as its strong industrial base makes it more likely to benefit from a pick-up in economic activity. Meanwhile, the platinum price lost ground to both gold and palladium prices, with the gold/platinum ratio now standing 28% above its long-term average and the platinum/palladium ratio trading 51% below its long-term average. Despite the strong price performance, investor sentiment towards precious metals remains subdued, with the exception of palladium. Gold ETF demand was down 1% over the month, likely driven by profit taking. Net speculative positioning in the futures markets decreased by 24% over the period, as long contracts diminished and short positions jumped 18%.
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