Dollar’s Rally Pushes Gold Down

Gold is back under $1,700, mostly due to the dollar’s rally back to 113 on the U.S. Dollar Index vs. 110 a week ago and 97 at the start of the year. Last Friday, a “stronger than expected” jobs report pushed interest rates and the dollar up and gold and stocks down. Although the unemployment rate dropped to 3.5% that number is almost meaningless since it represents just the tip of the iceberg of unemployed people – those actively looking for work. It doesn’t include the nearly 100 million Americans age 15 to 64 who are Not in the Labor Force or who are not looking for work, which is up over 45% from 68+ million at the end of 1999.

Australian Bank Says Platinum Could Reach $1375 by September 2023

So far, in 2022, Palladium is the only positive performer in the precious metals complex but is there any hope for the Chairman of the Board of the Platinum Group Metals? The six platinum-group metals in the periodic table of elements are the lighter trio of ruthenium-44, rhodium-45 and palladium-46, and the heavier trio of PGMs: osmium-76, iridium-77 and platinum-78. Platinum and palladium are considered precious metals both in coinage and in the essential catalytic converters for automobiles and light trucks.

As with gold and silver, a strong dollar has pushed platinum’s price down in dollar terms, although it is up in terms of most global currencies for the year to date. Platinum closed 2021 at $968 and is around $900 now for a 7% decline, similar to gold’s decline. However, it would be up about 8% to the euro, 10% to the British pound and up 20% in Japanese yen terms. In addition to the dollar’s strength, the other main catalyst to platinum’s roller-coaster ride was Russia’s invasion of Ukraine on February 24, since Russia produces about 11% of the world’s new platinum each year the #2 supplier behind South Africa. For that reason, the price spiked to $1,170 on March 8 before settling back to an 18-month low of $840 in July, as there seemed to be no globally coordinated sanctions against Russian exports of platinum group metals.

What could lift platinum back above $1,000? The first and easiest method would be for the dollar surge to peak, level out and then to see the dollar retreat toward its historical balance against the euro, pound and yen. This would give all of the precious metals a boost in terms of their U.S. dollar prices. Second would be some form of coordinated global sanctions against Russian exports of platinum and palladium, although Russia would always find a way to sell to third parties who would resell the metal under another national stamp.

The most hopeful catalyst would be the solving of the supply-chain challenges which have kept auto production limited and automotive prices unusually high. President Biden’s “Green New Deal” in the U.S. is also facing heavy challenges from consumers over costly electric vehicles (EVs), their batteries, electricity and also the fuel for their internal combustion engine vehicles. A return to normal global growth and affordable gasoline-fueled vehicles with free-flowing supply chains would be the greatest boon to platinum demand in catalytic converters. There would also be more industrial demand from petroleum, glass, medical and other industrial uses in a growing global economy once China emerges from its multiple lockdowns.

Owing to a slowing global economy, the total platinum supply in 2022 is forecast to decline 8% year-over-year. The recycling of platinum from spent auto catalysts is down by 20% year-over-year in the last measurable quarter (April to June 2022), with all auto recycling expected to be down 15% for the year. Meanwhile, total automotive demand for platinum grew by 8% year-over-year in 2022’s second quarter, so there is a rising demand to meet limited supply, a promising formula for future price gains.

How high can platinum go in a year? One bold prediction comes from the Australian bank, ANZ, which says platinum could reach $1,375 by September 2023. Others are more modest, in the $1,020 to $1,150 range. We don’t see great gains ahead for platinum, preferring gold and silver coins, but the noble metal has its place as a third precious metal in a widely diversified portfolio of precious metal coins and bars.