News

Market Update | Palladium, Platinum & Brexit

Current Valuations as of 27/02/2019:

Gold

$1,851.51/oz AUD

Silver

$22.28/oz AUD

Platinum

$1,218.64/oz AUD

For months, gold and precious metals have been on a steady upward trend – one that began to surge in mid-November of 2018 due to combined political and economic risk factors. During this time, we began to see Federal Reserve rate hikes, trade war expansions, and a slowing global property market propelled by an over-inflated real estate bubble.


While stocks markets are in good shape and have strengthened in recent months, gold, silver, and precious metals have held a firm course – gold even rose to a 10-month peak last week. Strong economies running parallel with strong gold and silver valuations is an interesting phenomenon as the two generally act in converse. But the anticipation of a global recession or weakening economies, with many ingredients pointing to such cases, seems to have kept interest firmly footed in gold and precious metals.


Source: Jaggards Charts


Nolan Watson, President, CEO, and Director of Sandstorm Gold told Kitco news that he regained confidence in gold.

“For the first time in a long time I feel all of the signs, everything is lining up to back gold.” Watson went on to say, “We're not seeing the flow of funds yet, so share prices are still really low. Companies’ share prices are down and out. I think it’s a good time to invest in the gold space.”


Palladium & Platinum

Palladium soared to record highs close at the $1,500 level last Tuesday following a decline in supply. A stricter emissions standard for catalytic converters could do much to keep this movement propelling upwards. Some analysts warn that palladium has risen too much too fast, though, and might undergo a correction.

"Palladium is a bubble and is moving much above what fundamentals suggest," said Gianclaudio Torlizzi, managing director at consultancy T-Commodity in Milan.

Platinum is also up, but not climbing to the peaks obtained by its sister, palladium. Platinum is also used in catalytic converters, but mainly diesel, which is seeing a decline in use.


Brexit & the EU

Another precious metals determinant to take note of is Brexit, which is moving to center stage as a potential economic disaster. The fundamentals of Brexit called for Britain to leave the EU in orderly stages, first entering a transition period on March 29th during which it would first negotiate its relationship with the EU and then leave entirely. But when Prime minister Teresa May, who spent two years creating the terms of that transition period, presented the agreed upon deal to parliament, she suffered the largest commons defeat in history.

The global economic significance of this cannot be ignored. If the UK departs the EU with Teresa May’s plan, Britain’s economists delineate and economic downturn of nearly 4 percent for all of the UK. But under a zero-transition, no-deal scenario, the economy of the UK is forecasted to crumble by a consequential 9.3 percent.

Such a catastrophic decline will unequivocally cause global ripple effects. With a final Brexit decision being mere weeks away, there may be swift economic impacts – and historically, as major economies begin to falter, gold and precious metals make unprecedented swings.