Gold, platinum, palladium: the price of precious metals will rise, according to OFI AM

Towards a consolidation of the equity markets by 10%

After posting satisfactory performances since the beginning of the year (from 15% to 20% for the global equity indices and between 5 and 8% for the bond markets), the markets could run out of fuel to exceed their recent highs. . "We could even see consolidation in the next few weeks of around 10%. In France, the CAC 40 index could return to the contact of 5,500 points, which would be an interesting point of entry, "explains Jean-Louis Mercadal, Deputy Chief Executive Officer at OFI AM.

A buoyant context for gold

At nearly $ 1,500 an ounce, the yellow metal is flirting with its highest levels in six months, an uptrend that has no reason to stop in the short term as central bank monetary policies maintain interest in the floor. "The recent change in attitude of the Federal Reserve, which began its first rate cut at the heart of the summer since December 2008, has reinforced the singular attraction of gold," says Benjamin Louvet, commodities manager. which adds that "the current context of low or even negative real interest rates is very favorable to exposure to precious metals (gold, palladium silver, platinum) as part of a long-term allocation". The reason for this enthusiasm is simple: "Gold yields nothing (no coupons or dividends) but it is always less than nothing (bonds at negative rates)" says the manager.

Gold: protection in the event of a geopolitical crisis

The traditional protection offered by gold in the event of a geopolitical crisis also pleads in favor of the precious metal, given the current international tensions. "Risk of conflict in Iran, Syria, Hong Kong, the list of geopolitical risks is particularly long at the end of the year," says Benjamin Louvet.

This uncertain, even anxiety-provoking environment should prove to be a drag on the prices of the main precious metals, particularly gold, which could exceed the symbolic threshold of $ 200 within 18 to 24 months, according to the management company.

A structural propensity

Other arguments that argue for a rise in gold are structural. First the production which is limited. The gold market is 4,500 tons per year, but the lack of discovery of new deposits has the effect of increasing mining costs for less gold extracted.
Other factors of support, the reconstitution of gold reserves from several central banks (BOE, Vietnam, Russia, Kazakhstan, China, Turkey, India to name a few) In a logic of diversification, central banks have bought for nearly 651 tons of gold in 2018 and this year could mark a new record in the matter, the central banks having already bought for 450 tons of gold at the end of September.

What about platinum and palladium?

In the precious metals category, other assets deserve to be taken into consideration. "In particular, palladium and platinum have a major role to play in the context of a fair energy and ecological transition. Used especially in the manufacture of catalytic converters, "platinum suffered from the dieselgate business, but the dynamism of the automotive market in emerging countries offers a positive outlook."

Unlike platinum, palladium has benefited from the scandal of dieslegate. Used in the manufacture of catalytic converters for gasoline engines, "this metal, which is 80% used in the manufacture of these pots, has jumped 100% in the last three years to break the $ 1,600 an ounce mark. last July, "says OFI AM.

A trend that should remain a carrier for these two metals, because the tightening of environmental standards requires more platinum and palladium for the manufacture of catalytic converters. Finally, "the rise of the electric and hybrid in the automobile should also boost demand for these two metals. It takes between 10 to 15% more platinum and palladium to build a hybrid engine than for a heat engine, "explains Benjamin Louvet.

"Precious metals benefit from the most favorable market conditions and offer good visibility for the coming years, especially as real rates will remain low", concludes the commodities manager.

How to invest in precious metals?

There are many ways to invest in these metals. You can do this by buying trackers, a sort of index funds that track and reflect the price evolution of these metals. The advantage of this type of investment is its liquidity, for costs that are limited. Other potions, buy fund shares. That of OFI AM (baptized OFI precious metal) offers exposure to gold, silver, palladium and platinum without being invested in mining stocks.

Florentine Loiseau ([email protected])