European precious metals companies: Global recession boosts safe-haven demand, bullish outlook for gold

Heraeus Precious Metals said it expects gold to be the best performing asset in the precious metals industry in 2024 as a potential global recession forces investors to look for safe haven assets.

Commodities analysts at Heraeus Precious Metals have released their outlook for 2024. They believe that gold prices will trade between $1,880 and $2,250 an ounce in the new year as the economic slowdown forces the Federal Reserve to cut interest rates. Analysts noted that gold has performed relatively well as the Federal Reserve has raised interest rates sharply, providing solid support for the dollar and driving bond yields to multi-year highs.

"Despite historically strong headwinds, the fact that non-yield gold has performed so well could set the stage for a record high in 2024 as the case for monetary policy easing is building," analysts said in the report.

Analysts say that while lower interest rates will be the biggest driver of the gold market, investment demand is crucial to the continued rise in gold prices.

"Rising prices tend to drive money into gold funds, although this is not the case in 2023." Analysts said that by the end of June 2023, despite gold prices rising more than 5 per cent year-to-date, gold ETF net outflows were about $800 million, "If gold prices continue to climb, then demand could grow further next year.

Analysts also expect central bank demand to remain stable in the new year. "Buying trends in emerging markets may now be well entrenched, with strong central bank demand expected to continue through 2024," the analysts said.

While a slowing economy will support gold as a safe-haven asset, Heraeus Precious Metals expects gold to weigh on silver and platinum group metals.

Analysts said: "Lower interest rates could be supportive for silver prices, but rate cuts are usually a sign that the economy is struggling, making silver's valuable and industrial characteristics inconsistent." Silver prices could rise next year, but underperform gold. The industrial and precious metals side of silver could move in the opposite direction.

The company forecasts that by 2204, silver will be trading at between $22 and $29 an ounce.

"The gold-to-silver ratio is above its long-term average, but it can move higher, as it has in five of the past six US recessions, because gold has outperformed silver," analysts said.

Analysts also believe weak economic growth will weigh on industrial demand for platinum by 2024, with the company expecting prices to be between $800 and $1,000 next year.

Analysts said: "Despite the market being in deficit, downward pressure from macroeconomic weakness is likely to keep prices within a similar trading range as they have this year.

The weakest link in the precious metals sector could be palladium as demand continues to fall, they said. Prices could fall as low as $700 as $1,200 an ounce limits the market's upside.

"Palladium prices still have room to fall further as it recovers from the extreme levels of recent years to historically normal levels," the analysts wrote. "There are risks to both demand and supply next year, but even in markets where deficits are expected, insufficient demand growth will take away some price support."