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Precious Metals Prices

No surprises expected for the new year

Although anything can happen with the economy in the coming year, jewelers can rest easy that no dramatic changes are expected when it comes to the prices of precious metals. “I expect slight increases, but nothing major,” says Dupuy.

“One thing to watch is silver,” says Rusty Heath, managing director of Legor USA in Albuquerque, New Mexico. “Historically, silver and gold tend to go up and down together.

This year, gold has increased quite a bit, but we haven’t seen the same rally in silver. If trends hold up, that should be coming too. Considering how much gold increased this year, a significant increase in silver could be coming.”

Gold spent the first part of this year hovering around $1,200 before slowly climbing higher during the summer. Since that time it’s been bouncing around between $1,400 and $1,550. Experts seem to agree that that price range will continue well into the new year.

“I think mid-$1,500s will be the average for gold next year,” says Dupuy. He also expects silver, which has been hovering around $17, to rise by a dollar or two.

“Gold tends to traditionally be viewed as a hedge against instability,” says Bart Melek, global head of commodity strategy for TD Securities in Toronto. He notes that although investor demand may not be robust right now, he does expect the global economy to slow down in the coming year, which could cause interest rates to lower and have investors taking another look at gold as a safe haven.

“We think the Fed will be forced to lower rates a little more to give opportunity for this market to do better,” he says. “We do see gold moving around $1,600 in the later part of next year.

“The big surprise will continue to be palladium; it keeps surging higher and higher,” he continues. It started the year at $1,266 and has been hovering around $1,800 for the last few weeks. Palladium, which is used to make catalytic converters for gasoline-powered vehicles, has been in demand thanks to tightening regulations on diesel cars in Europe. At the same time, there has been a lack of new mining supply of the metal, helping drive up the price. “Going forward, we could get higher prices for the metal.”

Dupuy believes that the price of palladium “may still rise another 10 percent” primarily due to the demand from the auto sector.

Dupuy also expects the price of platinum, which has spent the bulk of the year under $900, to rise in 2020. “Platinum has been suppressed, but it may climb a little to the $900 to $950 range.”

One other metal that has caught many in the jewelry industry a bit by surprise this year is rhodium, which started the year at $2,300 but as of presstime sits at $5,000, a level it hasn’t seen since 2008.

According to Heath, there are three factors contributing to the dramatic rise in the price of rhodium. “The catalytic converters in hybrid cars use rhodium, and a lot of it,” he says. “There is not enough rhodium coming from mines to support the demand for it. And refining rhodium from catalytic converters is extremely dirty, and the refineries are experiencing a lot of equipment downtime as a result.”

While he notes that refineries are improving their processes for dealing with the material, several platinum mines (which supply rhodium) are reaching the end of their lives.

“It’s hard to say what will happen next [with rhodium],” says Heath. “In 2007, rhodium experienced an even higher price increase. Then the bottom dropped out and it plummeted in a matter of weeks. Our best advice regarding rhodium is to make sure you are factoring the price of rhodium in your selling price. Or, considering that gold is more expensive than platinum at the moment, instead of plating white gold with rhodium to get that platinum look, why not just sell platinum?”

With uncertainty surrounding what will happen in the coming year, experts advise jewelers to keep an eye on the economy, as that will have the greatest influence on any metal price fluctuations.

“Jewelry is a discretionary purchase and driven by economic expectations,” says Melek. “Jewelry demand is a function of where the economy is.”

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