Interview: CPM Group’s Jeffrey Christian forecasts ‘somewhat higher prices’ for precious metals
Jeffrey Christian is the managing partner of CPM Group, a commodities research and management, consulting and financial advisory firm in New York. He founded the company in 1986, spinning off the Commodities Research Group from Goldman Sachs & Co., and its commodities trading arm, J. Aron & Company. Christian is an expert on precious metals markets and took time to speak with The Northern Miner about his outlook for gold, silver and platinum group metals in 2019.
The Northern Miner: Did anything surprise you about precious metal prices or trends this year?
Jeffrey Christian: It’s funny. We were just talking about that with one of our clients. This year the theme was “prepare and diversify”. The thinking was that prices of precious metals wouldn’t rise sharply this year, although there are a variety of factors that will probably push prices up sharply at some point in the next five years, but that 2018 would be a year of prices moving sideways. That said, silver, gold and platinum all fell over the course of the year, so prices were lower than what we thought. So we were right that it wouldn’t be a bullish year, but we were wrong because the prices actually declined and have moved to a somewhat lower level. That was the big surprise. We didn’t think prices would rise, but the fact that the prices fell in the second quarter and that they haven’t recovered significantly since then, surprised us.
TNM: So what is your outlook then for 2019?
JC: We’re looking for somewhat higher prices. If the theme for 2018 was ‘prepare and diversify’ and if you have an opportunity to diversify your wealth into precious metals in preparation for more hostile economic times later, you should. We’re now trying to come up with a new theme for 2019. The hostile conditions did not emerge in full force in 2018. We do think the financial, economic and political trends in many countries will all be supportive of higher prices, but they won’t really run away in 2019 yet. So next year will be better for gold and silver, but don’t expect too much. It’s true of platinum, silver and gold. Palladium has been running contrary to those other three and we think palladium prices will stay high, because there is tight fabrication demand and investor support behind the metal. But we don’t think palladium will continue to rise at the rate it has been. At the same time, we don’t necessarily see it falling sharply. We’re more bullish on gold than silver and more bullish on silver than platinum. We do think the platinum price is too low, but any increase in price seems likely to be modest in 2019.
TNM: What are your specific price forecasts for gold, silver and PGMs next year?
JC: We’re looking at the gold price to probably rise by about 2% or 3% in 2019. So if the gold price average through November 2018 was US$1,269 per oz., maybe it’s going to be US$1,300 per oz. next year and the price might reach US$1,340 to US$1,380 per oz. by the end of next year. We think there will be some strength, but it’s not a runaway. Now obviously that can change if the political and economic environment changes.
For silver we see a more forceful rise, but that’s partly because silver has been weaker this year. Through November it averaged US$15.68 per oz., and that was off 8.6% from 2017. Next year we think it will average US$17.70 per oz., so it would be about a 13% increase. But part of that increase is just offsetting this year’s decrease, whereas with gold, the price was flat this year. It didn’t fall 8.6%, so we don’t expect to see it rise that much. We’re not looking for a super large increase in gold next year but with silver, because it was so weak this year, we think you’ll see some recovery.
JC: We’re looking at an average of US$970 per oz. for the year in 2018 — a lot of the increase this year was in the last few months — and expect an average of US$940 per oz. in 2019. So it will be a little bit lower, but we don’t see it going back to the levels in play in 2016 and 2015. Prices got down to about US$550 an ounce in early 2016. We don’t see that happening.
TNM: It’s a complex time with the U.S-China trade war and now the arrest of Huawei’s CFO in Canada, Brexit, and so on. How do you see the landscape affecting the precious metals and mining space?
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