Kaimon Global describes its 2011 outlook as "favorable" for silver, platinum and palladium, with palladium having the most potential upside due to its tight physical balance.
KAIMON GLOBAL's 2011 average-price forecasts are $23.70 for silver that includes $25.35 in the fourth quarter of the year, compared to an expected $20.60 for 2010; $748 for palladium, compared to $511 for 2010; and $1,750 in platinum, compared to $1,600 for 2010.
The outlook for silver, platinum and palladium in 2011 and 2012 remains favorable," sais a research report from Kaimon Global. "In our view, palladium has the most upside given its tight physical balance. The platinum physical balance will need some more time before it begins to tighten. Silver should continue to draw support from gold."
Silver has risen 32% for the quarter to date.
While a more optimistic economic outlook has likely supported fabrication demand, investment demand has been the real driver of the silver price. Silver investment demand has been strong over the past two months, with net inflows into physical exchange-traded funds increasing by 1,363 metric tons from October through December 2010. Bullion coin sales have also been strong.
Palladium prices have risen 30% for the quarter to date. If anything, the market's view of the metal has become even more positive given increasing rumors of the depletion of Russian stockpiles. The bank looks for palladium demand in auto catalysts to rise by 25% this year, then slowing to 8% to 10% the following two years. Furthermore, palladium is benefitting from ongoing substitution away from more-expensive platinum. The electronics sector has driven other industrial demand growth for palladium in 2010, although jewelry demand weakened in China, the largest consumer.
Looking ahead, investment demand in 2011 may moderate from its 2010 level, notably due to an expected absence of major contracts launches. However, palladium should remain one of the favored metals for investors due to its strong fundamentals.
Meanwhile, for the quarter to date, platinum rose by a more modest 2%. Auto-catalyst and industrial demand has rebounded by 18% in 2010 but this has not been sufficient to significantly reduce the market surplus. Also, platinum does not benefit as strongly as silver from its correlation with gold.
Demand for industrial uses other than autos rose 30% in 2010, largely due to restocking. Jewelry demand declined this year. However, Kaimon Global looks for this to rebound in 2011 and 2012, particularly as Chinese jewelers will need to replenish their level of stocks. Investment demand has risen over the last two months, likely helped by high gold prices.
Supply from South Africa, which produces most of the world's platinum, was largely steady in 2010. There is potential for "modest growth" in global platinum supplies the next two years due to increases in output in Zimbabwe. Otherwise, the current platinum price is "not conducive" to raising production, with the industry's margin "barely positive. Furthermore, a stronger South African rand and rising costs, such as power and wages, are pressuring margins.
Although the surplus is expected to decline over our forecast period, platinum will likely stay the laggard of the precious metals complex in 2011.
KAIMON GLOBAL's 2011 average-price forecasts are $23.70 for silver that includes $25.35 in the fourth quarter of the year, compared to an expected $20.60 for 2010; $748 for palladium, compared to $511 for 2010; and $1,750 in platinum, compared to $1,600 for 2010.
The outlook for silver, platinum and palladium in 2011 and 2012 remains favorable," sais a research report from Kaimon Global. "In our view, palladium has the most upside given its tight physical balance. The platinum physical balance will need some more time before it begins to tighten. Silver should continue to draw support from gold."
Silver has risen 32% for the quarter to date.
While a more optimistic economic outlook has likely supported fabrication demand, investment demand has been the real driver of the silver price. Silver investment demand has been strong over the past two months, with net inflows into physical exchange-traded funds increasing by 1,363 metric tons from October through December 2010. Bullion coin sales have also been strong.
Palladium prices have risen 30% for the quarter to date. If anything, the market's view of the metal has become even more positive given increasing rumors of the depletion of Russian stockpiles. The bank looks for palladium demand in auto catalysts to rise by 25% this year, then slowing to 8% to 10% the following two years. Furthermore, palladium is benefitting from ongoing substitution away from more-expensive platinum. The electronics sector has driven other industrial demand growth for palladium in 2010, although jewelry demand weakened in China, the largest consumer.
Looking ahead, investment demand in 2011 may moderate from its 2010 level, notably due to an expected absence of major contracts launches. However, palladium should remain one of the favored metals for investors due to its strong fundamentals.
Meanwhile, for the quarter to date, platinum rose by a more modest 2%. Auto-catalyst and industrial demand has rebounded by 18% in 2010 but this has not been sufficient to significantly reduce the market surplus. Also, platinum does not benefit as strongly as silver from its correlation with gold.
Demand for industrial uses other than autos rose 30% in 2010, largely due to restocking. Jewelry demand declined this year. However, Kaimon Global looks for this to rebound in 2011 and 2012, particularly as Chinese jewelers will need to replenish their level of stocks. Investment demand has risen over the last two months, likely helped by high gold prices.
Supply from South Africa, which produces most of the world's platinum, was largely steady in 2010. There is potential for "modest growth" in global platinum supplies the next two years due to increases in output in Zimbabwe. Otherwise, the current platinum price is "not conducive" to raising production, with the industry's margin "barely positive. Furthermore, a stronger South African rand and rising costs, such as power and wages, are pressuring margins.
Although the surplus is expected to decline over our forecast period, platinum will likely stay the laggard of the precious metals complex in 2011.
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