After months of volatile trading, there is now indication that the precious metals complex will anchor more to the fundamentals. In the process, both platinum and palladium are likely to maintain their upward looking long-term trend while the eternal favourite gold is expected to move lower. Silver, as usual, will piggyback on gold.

Much more than the market fundamentals of demand and supply, investor sentiment dictates most movements in the precious metals market; and the sentiment has been impacted by a flurry of factors including geopolitical tensions (first Russia-Ukraine conflict and now Iraq), supply risks (labour action in producing regions) and somewhat enervated physical demand, in particular for gold.

Among precious metals, palladium prices hit a multi-year high this year (testing $850 an ounce) as the conflict involving Russia and strikes in South Africa combined to risk a supply disruption.

The fact that nearly four-fifth of the global palladium supplies come from these two sources was enough to make the market jittery.

Platinum story is similar. The two countries account for nearly 85 per cent of world supplies. High levels of platinum stocks weighed on the market in the initial stages and capped the upside; but with protracted labour action in South Africa, supplies are sure to tighten. No wonder, platinum touched $1,500/oz recently.

Without doubt, as and when the strike in South Africa comes to an end, supply risks will ease and there will be a near-term correction in market prices. At the same time, experts suggest that the long duration and severity of strike will be a supportive factor especially in the context of emerging deficit.

In other words, even when normalcy is restored and fundamentals begin to assert themselves, platinum group metals are likely to retain their upward-looking long-term trend.

The same cannot be said of gold. The yellow metal has benefited from its traditional haven status in recent months. However, when geopolitical tensions ease, less-committed investors are sure to exit; and one can expect gold to return to its downward trajectory witnessed since April last year.

Additionally, in two of the world’s largest import markets, physical demand for gold has not be healthy in recent months with slowdown in Chinese imports as well as continuing lacklustre performance by India. Customs duty of 10 per cent ad valorem and export obligation (80:20 scheme) have discouraged gold imports into India.

In the event, the current market price of above $1,300/oz provides a selling opportunity as the next stop seems to be $1,250/oz in the current quarter.

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