Credit: Piqsels

The precious metals market in the backdrop of Federal Reserve rate hikes and rising trade war tensions could imply more volatility. 

The prices are likely to soar up in the latter half of the year, according to sources.

In this context, Bart Melek, Head of the commodity strategy, TD Securities, said that the precious metals gold, silver, and platinum would be supported well and would follow a smoother upwards trend starting in the latter in 2018. He stated that in the backdrop of the market expecting three Federal Funds rate increases in 2018 and a sizable contingent of market watchers calling for four hikes, it was quite likely that the precious metals complex would be volatile for a greater part of the year. Meanwhile, according to sources, the Fed would not be hawkish this year, and the central bank would, in all probability, tread carefully in light of the trade wars, inclusive of U.S. President Donald Trump’s steel and aluminium tariffs.

It was also reported that the Fed would adopt a go-slow approach by the end of the US tightening cycle, which would weaken the USD as other central banks like the European Central Bank (ECB) would ready themselves to remove the monetary accommodation.

Melek projects that the gold prices would soar around $1,400, silver to $19, and the platinum group metals (PGMs) to almost $1,150 by the end of the next year. He adds that the optimism is predicated with the real and nominal interest rates that would not rise to restrictive levels. Industrial and physical demand would improve along with a robust global economy.

Meanwhile, with a few funded large projects on the horizon, a scramble in the next few years is expected to fund the supply expansions required to balance the future demand. And, with the current mine project pipeline, it is quite unlikely to keep up with the projected physical demand growth.