Updated Precious Metals Forecast H2 2020-H1 2021
Precious Metals Key Drivers
When we published our yearly Precious Metals Forecast in January of this year, like many, we did not anticipate the widespread effect of the Covid-19 pandemic. For several weeks, the world came to a near standstill and the impact on the world economies globally will be considerable. Although we do not usually adjust our yearly forecast, we believe it is justifiable as it will better reflect the current extraordinary situation and its impact on the coming year. Our updated forecast is for the period from the second half of 2020 till the end of the first half of 2021.
In January we predicted the global GDP real growth to remain under pressure till the end of 2020 and a possible gentle recovery in 2021. The IMF in its World Economic Outlook Publication on April 2020 projected the global growth in 2020 at -3.0 percent, compared to the January 2020 WEO updated projections representing a 6% mark down in global growth. The global stimulus package amount as of June the 9th 2020 stood at a colossal 15 trillion USD. This is unprecedented and will have a long-term impact on the world economies. Over the medium term, this massive influx of capital could result in inflationary pressure and a loss of purchasing power, in a negative global growth and negative interest rates context.
Stock markets have performed well lately, but we believe that this is as a result of the liquidity injection into the world markets and the low or negative interest rates. Once corporate results are published in early 2021, we fear that a sharp correction in the world stock markets is to be expected.
Unemployment rates have significantly increased globally and in this recessionary environment the property market could face another correction over the next 24 months.
The impact on precious metals is mixed. Gold as an investment metal and safe heaven shall see an influx of interest and rising prices. Silver as an investment but also as an industrial metal is also set to face a price increase. As a result, we have raised our average price targets for both metals. We have a mixed sentiment on both industrial metals, Platinum and Palladium, we are neutral to mildly bullish and we have decreased our price targets.
The ongoing geopolitical instability on various fronts in the Middle East will remain a key concern throughout 2020 and 2021. The trade war between the US and China has again escalated and shall remain a major concern into 2021.
In the actual economical context, it is to be expected that protectionism shall significantly increase over the coming months, as government will be tempted to become more selfish and protect their own agenda rather than international cooperation. This could to some extent negatively impact international relations and create new tensions between countries.