Platinum broke above $1000/oz to reach the highest level since September 2016. The rally was supported by palladium which has already added 14% to the 55% it gained in 2019. Palladium’s rally towards $2400/oz has been driven by supply deficits and surging demand on tightening emissions regulations. However, a widening premium to platinum of more than 1350 dollars has started to attract speculative buying of platinum on the assumption that carmakers may begin to substitute the two metals.
Gold has settled into a relatively tight range around $1550/oz following the failed January 8 spike above $1600/oz. Just like last year the yellow metal has so far managed to find support relatively soon following a push to a fresh high. It highlights the continued focus on gold as a portfolio insurance against a change in the current direction of stocks and bonds. We have reached a situation where rising stock prices drive rising gold prices as investors, while maintaining exposure to stocks, become increasingly concerned about the risk of a correction.
Supporting the bullish sentiment was comment from Bridgewater, the world’s largest hedge fund, that gold could surge to a record high above $2000/oz. The reasons being the same we have highlighted during the past few months. Real yields look set to fall further as Central Banks keep rates low despite rising inflation pressures. Adding to this political uncertainty, the risk of renewed U.S. – China trade worries, the potential for a weaker dollar and elevated stock market valuations.
We maintain a bullish outlook for gold but sense a potential prolonged period of consolidation which could result in some profit taking driving gold lower towards support, currently located at $1535/oz followed by $1520/oz. Longer term bulls are unlikely to worry unless the price breaks below the late 2019 consolidation low below $1450/oz.