Precious Metals Outlook Hinges on the Pandemic Fight and Monetary Policy Direction
The future prices of precious metals depend on how we fight the pandemic and how the monetary policy is shaped. Gold, Silver, Platinum, Palladium were all affected by the COVID crisis. Here’s how:
Gold
In the second half of the year, gold prices dropped, mainly due to outflows from gold-backed exchange-traded funds (EFTs) from North American investors and slower central bank transactions.
In November, the yield on the 10-year inflation-indexed Treasury securities decreased to -1.06 percent, as the increasing expectations of a rise in inflation overcame minor increases in nominal interest rates. In the future, the uncertainty surrounding the Omicron COVID variant may cause gold prices to rise due to the safe-haven demand. A tightening of the monetary policy, on the other hand, might lead to higher real interest rates, reducing gold’s appeal.
Silver
In the second half of 2021, China’s manufacturing Purchasing Manager’s Index (PMI) was sluggish, while Japan’s PMI reading fared well below the average across the world. Silver-containing products, such as electronics, solar panels, and photographic equipment, are widely used in both countries. Silver’s short-term prospects are largely dependent on the strength of the global economic recovery, which is being hampered by a recurrence of COVID infections in the wake of the new Omicron variant, particularly in Europe and the US.
Platinum and Palladium
Since early May, the decline in car production has caused platinum and palladium prices to plummet. The global shortage of semiconductor chips has slowed vehicle production, resulting in a dramatic drop in demand for autocatalysts. Autocatalysts account for one-third of platinum demand and four-fifths of the palladium demand. Both metals are utilized in car engines’ catalytic converters to minimize pollution by curbing the emissions of harmful gasses into the environment. On the supply side, mine production in South Africa has improved significantly, more than offsetting outages at two Russian mines. If the ongoing semiconductor chip shortage isn’t sorted out, platinum and palladium prices are likely to fall in 2022.
This is how these precious metals performed over the last year, and it’s safe to assume the demands and prices will rebound once we get back to normal. If you’re looking to invest in precious metals, Orion Metal Exchange offers gold, silver, platinum, and palladium coins and bullions. We’re also offering gold and silver IRA services. Contact us now to learn more.
