Goldman Sachs keeps an upbeat outlook of palladium despite recent price
weakness, predicting the metal to rise to $863 during the next year.
“The fundamentals of palladium remain attractive in our view given we
expect a re-acceleration in automotive output in China and have a
positive outlook for gasoline output growth in other markets,” Goldman
says.
The body added that the drop in oil prices drives larger engine size car
sales, which have higher metal loadings.
However, today palladium is on the defensive. This was caused by disappointing
auto sales numbers from China and media reports of increased supply
from both primary and secondary sources, Goldman says.
The bank expects
platinum to average $1,175 over the next 12 months, also noting that
there is a downside risk to the forecast if auto sales decrease or
supply surprises to the upside. Goldman considers a surplus of supplies to be the main reason for this metal to hover near multi-year lows.
“We believe this price weakness reflects disappointing demand and a ramping-up of supply, not inventory liquidation, confirmed by the significant underperformance of platinum despite strong ZAR (South African rand) and gold,” Goldman says.
With weighty low-cost supply due online over the next two-four years and as gold prices are expected to stay pressured, "we believe that the platinum price will remain under the marginal cost of production, which we see at US$1,050-1,150/oz, in order to incentivize closures.”
