According to the GFMS Gold Survey 2018, despite significant changes in supply and demand, the price of gold remained stable in 2017, rising only 0.5 percent. The GFMS attributes this relative stability to a combination of weaker ETF demand being offset by a meaningful improvement in physical demand. While the GFMS believes the gold price could approach $1,500 later this year, it expects it to average $1,360 for the year. Total physical demand for gold jumped 10 percent in 2017, the first increase in four years. The main driver behind the
increase was a 13 percent expansion in jewelry fabrication demand to 2,214 tons. Much of the rise in that demand can be attributed to the Indian market, which saw a 58 percent year-on-year increase as the market stocked up ahead of the implementation of the Goods & Services Tax that went into effect in July 2017.
While demand for gold rose, both global mine production and scrap supply fell in 2017. The stable price of gold resulted in a 7 percent drop in scrap supply to 1,210 tons. Driven primarily by environmental concerns in China and a crackdown on illegal mining in Indonesia, mine production fell by 0.1 percent to 3,247 tons—the first annual drop since 2008. However, the GFMS believes this drop to be a blip and expects mine production to rise this year due to rising Russian output and a stabilization of product from China.
In its most recent quarterly reports, the World Platinum Investment Council (WPIC), in collaboration with SFA(Oxford) Ltd., reported that the platinum market was in a surplus for 2017. Total platinum supply increased by 1 percent to 8,015 thousand ounces in 2017, with mining production rising 1 percent and secondary supply of the metal increasing 3 per- cent. However, the WPIC expects global platinum supply to fall 1 percent to 7,975 thousand ounces this year with total mining supply forecast to fall 3 percent following the closure of several South African mines in 2017.
Global demand of platinum in 2017 fell 7 percent to 7,765 thou- sand ounces. Part of that decrease is attributed to a 2 percent decline in jewelry demand, as a contraction in the Chinese market was only partially offset by gains in other regions. The WPIC is projecting that global demand will be marginally higher this year, as gains in industrial and jewelry demand are expected to offset likely declines in automotive and investment demand. Jewelry demand is forecast to increase 2 percent to 2,510 thousand ounces this year, as continued growth is expected in North America, Europe, and India, and Chinese demand is projected to stabilize as consumer sentiment there rises.
With the supply of platinum expected to fall and demand rising slightly, the WPIC expects the market to end the year with a more modest 180 thousand ounce surplus.
For the fifth year in a row, the silver market recorded a deficit in 2017. According to the GFMS World Silver Survey 2018, the deficit is partially attributed to a second consecutive year of decreases in silver mine supply. Silver mine production fell thanks to a string of supply disruptions across the Americas as well as a reduction in mining in China, the number-three producer of silver, due to the Chinese government’s cracking down on mining operations and efforts to fight pollution and increase attention to environmental protection. Worldwide industrial fabrication demand for the metal increased 4 percent to 599 million ounces, the
highest level since 2013. Although the bulk of the demand stemmed from the electronics industry, silver demand for jewelry fabrication also saw an increase, rising 2 percent to 209.1 million ounces. Growth in India (by 7 percent) and in North America (by 12 percent in the U.S. alone— an outcome of a stronger economy and improving consumer sentiment) accounted for most of the fabrication increase.
In 2018, the GFMS expects silver supply to grow approximately 3 percent as mining rates return to normal and output from primary silver mines in the Americas increases. With mine output expected to increase, refining production is also expected to grow, which will be driven largely by expanding smelter capacity in China. The GFMS predicts similar growth in mine output in 2019, but anticipates levels falling in 2020 from a lack of committed projects on the horizon.
In the December 2017 issue of MJSA Journal, we reported that Harold Dupuy, FGA, vice president, strategic analysis of Stuller Inc. in Lafayette, Louisiana, predicted that the precious metal markets were going to “stay fairly stable year to year.” We checked in with him for his latest thoughts on metal prices, and his forecasts, which he builds on an index that includes approximately 35 precious metal analysts from around the world, are pretty much still in line with his earlier predictions. In the chart featured here, you’ll see the average precious metal prices for the last couple of years, where they stand as of May 29, and what Dupuy expects them to average for the year.
Click HERE to read about top jewelry trends in gold, silver, and platinum.