When it comes to precious metals, forget gold and silver.
Focus on platinum instead, according to the latest research released by the World Bank.8
The international financial institution’s Commodity Markets Outlook forecasts precious metals prices to fall by 1% next year, but with some “divergence.”
“Gold prices are expected to drop 1 percent as anticipated U.S. interest rate hikes materialize. Silver prices are forecast to ease, in line with investment demand for gold,” the analysts wrote in the report released Friday.
However there is one bright spot: “Platinum prices are seen climbing 4 percent on increasing catalyst demand and tightening mine supply.”
Looking further out, the so-called divergence widens among gold, silver and platinum prices.
Looking at current precious metals prices and based on the World Bank’s price forecasts, platinum is set to gain the most over the long term, as much as 64% by 2030. Meanwhile, gold and silver would decline by about 13% and 4%, respectively, within that same time frame.
“Auto catalyst demand, the largest component of platinum consumption, remains robust, and new emissions regulations in Europe are anticipated to intensify platinum use,” the report said. “Mine supply in South Africa, which produces 70 percent of world’s platinum, remains financially fragile.”
But risks to platinum demand remain, with the analysts noting that, “The auto sector faces reputational damage following the diesel emissions scandal. Diesel vehicle sales are falling, and some countries favor phasing out diesel vehicles sales by 2040 (Britain and France).”
Despite forecasts for lower gold prices, there still remains upside risks for the yellow metal.
“Upside risks to the forecast include widening geopolitical tensions, delays in central bank rate increases, a weaker-than expected dollar, and a mine supply shortfall,” the report said.
The World Bank said it expects gold prices to average $1,238 an ounce in 2018, representing a roughly 2.5% decline from current prices of $1,270. In 2019 and 2020, they forecast gold to drop to $1,226 and $1,214, respectively.
The decline in gold prices will be mainly driven by higher U.S. interest rates, they explained.
As for silver, the analysts are slightly more bullish than gold given the metal’s industrial price component.
“Demand from the photovoltaic industry remains strong, but silver use is expected to contract because of substitution and technology advances. Mine supply is slipping, and lower by-product output from declining lead/zinc production may limit growth,” they said.
The report showed that the World Bank forecasts silver prices to average $16.92 an ounce in 2018, $16.84 in 2019 and $16 by 2030. Currently, silver prices are trading around $16.70 an ounce.