While gold continues to capture investor attention in a volatile macro environment, its industrial cousins (silver, platinum and palladium) have failed to keep pace.
UBS has now scaled back its price forecasts for these so-called white precious metals, citing slower economic growth and weak investor sentiment.
The backdrop for silver, platinum and palladium is more complex than for gold.
Each has a dual role as both a store of value and a key input for industry, which means their fortunes are more sensitive to shifts in economic activity.
The Swiss bank still sees higher prices ahead from current levels but has revised its expectations lower, particularly for silver and palladium, to reflect softer fundamentals.
Unlike base metals, supply remains tight for all three. Market deficits persist, even when factoring in weaker demand. But investors haven’t turned to white metals as a proxy for gold, despite ongoing geopolitical uncertainty and growing concerns about global growth.
Silver, in particular, looks caught in the middle. The gold-to-silver ratio, a key indicator of relative value, is higher than historical norms, suggesting silver is cheap by comparison.
But it’s struggling to attract inflows. Exchange-traded fund holdings have remained flat this year, whereas gold ETFs are up 7%. Futures markets tell a slightly more hopeful story, with net long positions in silver rising even as gold positioning stays muted.
UBS thinks silver could benefit from a catch-up rally if investor enthusiasm for gold hits a peak. Demand remains solid despite weaker manufacturing data, and the market would need to see an unprecedented 30% collapse in industrial consumption to move into surplus. A dovish turn by the US Federal Reserve could also be a trigger.
Platinum and palladium, both part of the platinum group metals (PGMs), are more tightly linked to the auto industry.
Platinum’s price is trading near the bottom of the cost curve, suggesting limited downside from here, but demand is under pressure. Jewellery may provide some lift, especially as platinum becomes more competitively priced relative to white gold.
Palladium faces stiffer headwinds. More than 80% of its demand comes from vehicle emissions systems, a sector that’s been hit by falling sales and the shift towards electric vehicles.
That said, Chinese scrap supply is growing, which may offset primary production declines. Inventory levels are also dwindling, keeping the market tight and susceptible to price spikes if supply gets disrupted.
Overall, UBS sees room for a modest recovery in white metal prices, but any upside is likely to depend more on supply constraints than a broad surge in demand.