Precious metal ETFs have been in the spotlight of late. Rising geopolitical risks and trade war fears have increased the appeal of some of these funds as safe-haven investments. While leasing of palladium has led to a fall in favor of palladium-focused funds, strong fundamentals have driven demand for platinum.
Factors Driving Prices
Gold and Silver
The Federal Reserve hiked interest rates by 25 basis points in Powell’s first meeting as chairman. The new benchmark funds rate was increased to 1.5% to 1.75% in March. Per the CME Fed watch tool, two more hikes are expected in 2018.
However, geopolitical risks have been on the rise. The latest chemical attack on Syria has led to increased tensions between Russia and the rest of the world, as major leaders accuse Russia of supporting the Syrian president Bashar al-Assad’s actions. Moreover, trade war fears have increased the appeal of safe-haven investing.
After announcing tariffs on around $50 billion worth of goods from China, President Trump has threatened to impose further tariffs on goods valued at around $100 billion. Beijing has threatened to retaliate, although Trump expects negotiations to calm the markets.
Moreover, silver prices have been volatile in the past year owing to relatively lesser demand and rising geopolitical uncertainty. However, multiple analysts expect silver to stage a comeback. “We expect silver to move moderately higher in 2018 and 2019 based on strong industrial demand and limited supply,” per a Kitco article citing James Steel, chief precious metals analyst at HSBC.
Palladium and Platinum
The auto industry generates maximum demand for these two metals. Platinum is more widely used in diesel vehicles, which has fallen out of favor lately, owing to the 2015 Volkswagen emission scandal.
However, optimists expect an uptick in industrial and jewelry demand for the metal. Moreover, after the ousting of South African president Jacob Zuma, new president Cyril Ramaphosa has taken steps to make investing in the country attractive. Extensive reforms and foreign investments might lead to an appreciation of the rand.