Platinum is drawing investment as a financial asset and palladium boasts an enviable market balance, but silver could top the precious metals pack this year as its latest fall offers a chance to buy, GFMS's Philip Klapwijk said.
The managing director of the metals consultancy, which on Thursday released its 2010 Platinum and Palladium market survey, said that once the current price decline from last week's record above $49 an ounce has petered out, silver has enough favor among investors to return to these levels.
"If we see silver drop, perhaps down close to $30-mark then, (it) would look a pretty decent buy, because through to the end of the year, you've got the possibility of 40- to 50-percent price gains," Klapwijk said in an interview with Reuters.
"I'm not sure that silver would get above $50 but would we see it in the upper $40s again? Quite possibly. I don't see that scale of increase probably out there for gold and for platinum, and probably not for palladium either," he said.
The silver price, which is still up about 22 percent so far this year at $38 an ounce, is set for its largest weekly decline in nearly 30 years, led by selling after a series of sharp rises in margin requirements to hold U.S. silver futures, as well as hefty outflows of metal from the world's largest exchange-traded funds.
Depending on Europe
Gold, which hit a record $1,575.79 an ounce on Monday, is up only 6.5 percent this year, while platinum has risen by 1.7 percent to around $1,885 an ounce.
Palladium, which virtually doubled in price last year, has lost nearly 8 percent to trade around $728.25, its lowest in nearly two months.
GFMS expects platinum to show a seventh consecutive annual surplus in 2011, as jewelry demand softens and consumption from the auto sector continues to depend on the struggling European market, which is predominantly diesel-powered and utilizes platinum parts.
Palladium, on the other hand, is forecast to show a deficit — possibly of over half a million ounces in 2011 — for a fifth year in a row, while demand is expected to show modest improvement, largely thanks to robust use of the metal in catalytic converters for the gasoline-intensive Chinese and U.S. markets.
"The motivation for investment in platinum...has shifted from an assessment of the commodity fundamentals and a decision whether these support higher prices or not, to broader considerations that take into account financial and economic factors, and which are encouraging investment demand for the purposes of portfolio diversification as a hedge against the dollar and financial risk," Klapwijk said.
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