Spot gold price to trade at record highs, but platinum is the one to watch in 2023 - StoneX

The precious sector will do well this year, with gold and silver expected to gain around 14% by the end of 2023, but platinum will see the biggest returns, according to StoneX.

Despite some recent profit-taking, the set-up for gold is very much a bullish one, said StoneX analyst Rhona O'Connell during a webinar. The U.S. dollar outlook, geopolitical tensions, stagflationary worries, and a sudden surge in central bank gold buying will boost prices to record highs in many currencies, including the U.S. dollar.

StoneX's year-end gold price target is $2,070 an ounce, up 14.2%. This would mark a new record high in U.S. dollar terms but not in real terms, O'Connell noted. "Gold to touch record highs this year (spot not average) in dollars and major currencies, but not in real terms," she specified. "While nominal records are feasible, reflated by the U.S. CPI a $2,075 price target would be 34% below January 1980. Historically real prices have outperformed when inflation is seen as a threat - but now we have monetary policy."

One of the main reasons behind the rally in gold is the unwinding of the long U.S. dollar trade. "The long-dollar trade is unwinding, and the liquidity in the system is looking for fresh homes, and there has clearly been professional positioning in the gold market early this year in anticipation of the Fed reversal," O'Connell said. "And investors always looking to be ahead of the game have been moving into gold. We can also see tangible shifts in the CFTC managed money positioning."

There are also geopolitical tensions and global uncertainty that are pushing more players into gold, especially central banks. "The global bifurcation is likely to drive continued diversification from countries while others absorb gold for risk aversion and credibility in the international markets. And one of the other elements that the World Gold Council pointed to as why central banks want gold is for its role in a crisis," O'Connell noted.

The central banks are telling a story, and gold plays a big part here, with the WGC releasing a report last week that showed central banks purchasing 1,136 tonnes of gold — the most since 1967.

With these purchases, "central banks are saying that they don't like the level of risk in the global economy," O'Connell pointed out.

Silver to follow gold's footsteps more than copper's

O'Connell added that silver prices would follow gold this year and pay less attention to copper.

"On balance, we expect silver to outperform the bullish gold market, but with its usual volatility and the propensity of the professional investors to take profits fairly quickly. We don't think that the trend is going to be very much higher than that gold," she said.

StoneX's year-end target for silver is at $27.25, up 13.8%. "Silver was rejuvenated in 2022, driven in part by resurgent Indian demand; overall imports moved towards 10,000t, almost redressing the 2020 and 2021 shortfalls," O'Connell noted.

Platinum is the one to outperform the others

The platinum market is moving into deficit, and prices are expected to climb 16.4%, with the year-end price target of $1,240 an ounce.

"Base-case is for the global mine production to be more or less flat in 2023. But the risk definitely lies to the downside, particularly coming from South Africa," O'Connell described. "On the other side, demand is looking relatively bright as the global vehicle industry recovers."

Also, the idea that platinum is a substitute for palladium in the auto sector could lead to platinum being the best-performing precious metal this year, she explained.

Palladium is 'questionable'

Palladium is not really coming back into favor, according to O'Connell. StoneX sees the metal's year-end price target of $1,830 an ounce, which would be up 2.3%.

"We are expecting it to be in a small deficit this year, equivalent to roughly three weeks global demand. But the overall picture does remain gloomy for the longer term with the electrification of the vehicle fleet," she stated. "Within the next ten years or so, if the auto projections that we are using for our global auto case are broadly accurate, then there comes the point around about 2032-2033 when the number of internal combustion fueled cars that are coming back off into scrape would be more than the number going out into the market."