There are actually quite a number of challenges that the precious-metals market is faced with at the moment. They vary, depending on which metal you
are looking at in particular. When we are looking at gold, silver as well as platinum, what you have is a rather adverse macroeconomic backdrop
that, in many cases, results in negative investor sentiment and by implication, also, positioning. In the case of palladium, it is quite a different
story. As you know, the price has been performing extremely well but what we have there is periods of quite sharp shortages of material availability,
which creates challenges for mainly auto‑catalyst manufacturers and car companies that are trying to secure supply at these times.
Really, the main factors that are driving gold at this point in time – and, indeed, have been for the past few years – are issues relating to macroeconomic
factors such as the strength of the US dollar; US interest rates, which, in many ways, is related to the strength of the US dollar; and the performance
of the US economy, because of its impact on equity prices and, by implication, an opportunity cost for investors holding gold when they can make
such good returns in equities. These are really the factors that have been weighing on gold over the past year.
I think there will be a time when the case for investing in gold will be a lot clearer. We probably need to wait for six to 12 months before this really
starts happening because I think what you really need to see is a reversal in the outflow of funds away from emerging markets and into the dollar.
You need to move into a secular decline in the US dollar. I think you also need to start seeing some cracks in the US economy before it starts
to make sense for mainstream investors to even start looking at some small allocations in gold.
It is quite a tough question to ask: which metal will be the best performer for 2019? Because you know, on the one hand, the fundamental analyst in
me wants to say palladium because it has by far the best fundamental across the board, but its price already reflects that to an extent. Even though
this should, by far, be the strongest in terms of supply-and-demand conditions, its upside might prove a little limited from current, already elevated
levels. So I think perversely, it might be one of the worst performing or the ones that look the weakest, for instance silver, purely because of
how low its price has been recently and the fact that it tends to be a high-beta trade on gold or, in other words, follows gold’s performance but
outperforms it, with higher volatility. If we are looking far enough into 2019, towards the end of the year, where Metals Focus does expect the
whole precious-metals market will start rallying again, you may find that silver, perversely, does better than the rest.