Australia Precious Metals Price Forecast: Top Trends for 2023

What's next for palladium after 2022's all-time high?

Palladium had a strong start in 2022, rising 31 percent to hit US$2,490 per ounce after Russia's February 23 invasion of Ukraine.

As the conflict continued, and as other concerns intensified, worldwide markets entered bear territory in early March. This risk-off sentiment propelled the precious metals, with gold surging to US$2,053 per ounce, silver to US$26.36 per ounce, platinum to US$1,152 per ounce and palladium to US$3,184 — all year-to-date highs.

For palladium, the level was an all-time high, with the metal benefiting from the convergence of several tailwinds.

Since 2019, palladium prices have sat in historically high territory, marking several new all-time highs in that period. Its persistently high values have led to increased substitution of palladium in the auto sector.

As Wilma Swarts, director of platinum-group metals at Metals Focus, explained, concerns that the war would lead to more substitution have yet to materialise. “The substitution of palladium is more a factor of the high price than the Russian war,” she told the Investing News Network (INN). “At this point, there are no sanctions on the use of Russian palladium.”

“While several companies have indicated their intention not to renew any offtake agreements, which could have some implications in 2023, we expect that the metal will continue to find its route to the market," Swarts added.

Securing supply this year could be important as the palladium market is now back in a deficit following a surplus in 2021. The shortfall stems from a decline in supply as production continued to contract year-over-year.

Demand also weakened in 2022. In addition to a reduction in automotive demand, which accounts for 80 percent of palladium end use, a global slowdown in consumer electronics buying eroded the demand for the metal.

By the end of Q3, gold, silver and platinum had contracted significantly, registering year-to-date lows across the board. Palladium fell to its 2022 low point — US$1,667 — in December. The metal ended 2022 at US$1,748.

Platinum supply struggles to continue in 2023 

Like palladium, platinum was also subject to supply challenges in 2022.

"I think a predominant trend (has) been on the supply side,” said Ed Sterck, director of research at the World Platinum Investment Council. “If we look at mine supply and recycling, both have struggled quite significantly in 2022, and those challenges are not going to disappear in 2023. They will continue.”

Most of the platinum market’s supply issues were the result of output disruptions in South Africa, the top-producing nation. Ongoing electricity problems have impacted mining in the country, leading to lower production.

“That's really because there's power supply challenges in South Africa,” Sterck said. “They have been continuing to have to load shed for different parts of the country. That effectively means that there's not enough power to go around.”

The issue only grew worse over the course of 2022 as load shedding grew by 140 percent in Q3 compared to Q2.

Platinum was able to reap some price upside as demand from the automotive sector increased by 25 percent year-on-year. The uptick came as auto manufacturers moved away from palladium and towards platinum.

Sterck is also concerned about the ability of Russian platinum producers to secure mining equipment as western companies shun the country. A decrease in Russia's output could weigh heavily on the market if South Africa’s energy problems worsen.

“I think there's quite a high risk to Russian supply going forwards,” Sterck said. “The moment the sanctions are in place, the greater the risk that they'll run into some challenges.”

Platinum ended the year trading for US$1,045.

Silver demand hits new high in 2022, deficit projected

The silver price made a 4.5 percent gain during 2022 as demand for the white metal soared to 1.21 billion ounces for the first time. The segment saw a 16 percent year-on-year increase driven by a resurgence in industrial demand.

“Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies and government commitments to green infrastructure will have industrial demand overcome macroeconomic headwinds and weaker consumer electronics demand,” a Silver Institute report notes.

As mentioned, the silver price saw its 2022 top at US$26.36 in March; however, global inflation, rising interest rates and recession fears pushed the white metal to a year-to-date low of US$17.88 in September.

“ETFs (in 2022) are forecast to see the largest annual decline in holdings totaling 110 million ounces, due in part to silver’s higher volatility than gold, which has made it more vulnerable to profit-taking,” the Silver Institute states. “Institutional investors are expected to retain a bearish stance as real yields are likely to strengthen, encouraging further distance from the white metal.”

Bar and coin demand jumped 18 percent year-on-year to hit 329 million ounces, a record high.

“Support has come from investor fears of high inflation, the Russia-Ukraine war, recessionary concerns, mistrust in government, and buying on price dips,” the report states. “The rise was boosted further by a (near-doubling) of Indian demand, a recovery from a slump last year, with investors often taking advantage of lower rupee prices.”

The broad-based demand increase kept the silver market in deficit throughout the year and is likely to continue in 2023. The 194 million ounce shortfall represents a multi-decade high and is four times the level seen in 2021.

In Australia, silver exploration increased in 2022. The by-product metal, which saw less spending on exploration contracts over the pandemic, began to see a resurgence in discovery dollars.

“Exploration expenditure for silver, lead and zinc rose 50 percent year-on-year in the September quarter 2022,” a report from the country's Office of the Chief Economist reads. According to the document, “(spending) slumped in 2020 — due to the COVID pandemic — but recovered as zinc prices rose over 2021 and 2022.”

Looking ahead, exploration expenditures are expected to moderate as zinc prices contract.

Silver ended the year at US$24.06, a dollar higher than its 2022 start value.

Australia reports higher gold production and exports

Aided by its hedge allure, gold posted a 5.7 percent gain for 2022, moving from US$1,811 to US$1,915.

However, even as risk-averse investors looked for safe havens, gold was negatively impacted by the strong US dollar, which weighed on the metal’s ability to move past its 2022 high point of over US$2,000.

The story was different in other currencies, where gold made pronounced gains. On March 11, gold reached a 19 month high in Australian dollars, coming in at AU$2,730.20.

“Gold is quoted in US dollars, but the reality is investors and consumers experience gold in their own currency,” said Juan Carlos Artigas, global head of research at the World Gold Council.

Gold exports grew as well, with national shipments anticipated to bring in AU$27 billion in 2022/2023.

“Australia’s gold exports increased by 23 percent year-on-year to AU$6.7 billion in the September quarter 2022,” as per the Office of the Chief Economist. “The increase was driven by a 12 percent increase in export volumes, also supported by higher Australian dollar gold prices.” The increased exports were supported by a 3.7 percent annual uptick in production.

For 2023, Australia's gold sector is expected to register another 3.7 percent annual increase in output, bringing the total to 331 tonnes. But there are factors outside the country that could prevent a ramp up.

“The primary risk to the Australian gold production forecast is the extent to which supply chain issues and labor, or skill shortages persist in the short term,” the Office of the Chief Economist notes.

Additionally, a weaker-than-forecast gold price presents “further downside risk” to Australian gold production. “Much weaker prices would see high-cost Australian producers cease or cut back their operations,” the report reads.

Although gold has trended higher in both US and Australian dollars since November, the government body expects price volatility ahead amid precarious economic conditions. “The lower US dollar gold price is expected to drive the Australian dollar gold price lower from around AU$2,600 an ounce in 2022 to AU$2,200 an ounce in 2024," it states.

Gold ended 2022 priced at AU$2,700.