Gold has performed better in times of negative real interest rates than in times of not-negative rates. For other, more industrially used, precious metals, ETF Securities sees positive price signals too.
In times of negative interest rates, investors flee into real assets. Thereby, ETF Securities sees no difference between the negative deposit rates of today and negative real interest rates of the seventies and after the the credit bubble, in which gold has performed better than in times of not-negative rates. Moreover, companies will try to avoid the negative interest rates and thereby the higher costs of cash by investing in gold. Both are beneficial for the gold price.
Low interest rates will also have an effect on gold futures. Due to lower interest rates, the financing of those contracts is becoming cheaper and the prices along the futures curve will go down. The further interest rates fall, the greater is the chance that the commodity curve will reverse.
Silver, platinum and palladium have recovered since the beginning of the year, which is partly due to the strong correlation to gold. Since 1993, monthly returns of silver and palladium have correlated with gold to 80% and 57%, says ETF Securities in the latest outlook, while palladium and gold correlate only to 25%. This is due to silver and platinum being used as investments while palladium is used solely as an industrial metal.
Since 2011, mostly industrial used precious metals have fallen. Half of the silver production, 70% of the platinum and 90% of the palladium production is used industrially. A lower demand from China has effected prices negatively. Because the demand for industrial precious metal is increasing and the supply is limited, this year will be affected by a supply deficit, which will support prices, says ETF Securities.