In Q4 2022, a composite of the four precious metals traded on the CME’s COMEX and NYMEX divisions rose 10.48%. In Q3 2022, gold, silver, platinum, and rhodium prices declined, while palladium moved to the upside. In that report, I highlighted the strong dollar and falling bond prices leading to higher interest rates weighed on the metals that have industrial applications and are financial assets.
In 2022, the precious metal composite moved 1.99% higher, a significant achievement considering the dollar index rose to a two-decade high, and the Fed Funds Rate moved from 0.125% in March 2022 to 4.375% at the end of December. Moreover, quantitative tightening pushed interest rates higher along the yield curve. While the currency and bond markets put pressure on the precious metals, the sector eked out a small gain for the year, a testament to the metal’s underlying strength.
Gold rallies in Q4 and outperforms stocks and bonds in 2022
Nearby COMEX gold futures moved 9.85% higher in Q4 and was 0.13% lower than the 2021 closing level on December 30, 2022.
The chart highlights that nearby COMEX gold futures settled at $1,826.20 on December 30, 2022, a touch lower than the $1,827.50 closing level at the end of 2021.
Gold may have declined for the year, but it far outperformed stocks and bonds and was a store of value for investors in a very volatile year in markets across all asset classes. The most diversified stocks market index, the S&P 500, posted a 19.44% decline in 2022, and the U.S. 30-Year Treasury bond futures dropped 22.07% in the year that ended on December 30, 2022. Gold exhibited underlying strength, given the declines in stocks and bonds, as the price action typically weighs on gold prices.
Silver led the sector higher in Q4 and rallied in 2022
Nearby COMEX silver futures moved 26.27% higher in Q4 and was 2.95% higher than the 2021 closing level on December 30, 2022. Silver led the sector higher in Q4 and was one of two precious metals that moved to the upside in 2022.
The chart highlights that nearby COMEX silver futures settled at $24.04 on December 30, 2022, higher than the $23.328 closing level at the end of 2021. Silver outperformed gold in Q4 and 2022, causing the silver-gold ratio to decline for the quarter and year. A falling ratio tends to be a bullish signal for gold and silver prices.
Platinum moves to the upside in Q4 and leads the sector in 2022
Nearby NYMEX platinum futures moved 23.27% higher in Q4 and was 11.13% higher than the 2021 closing level on December 30, 2022. Platinum led the sector higher in 2022 after lagging other precious metals prices over the past years.
The chart shows that nearby NYMEX platinum futures settled at $1,073.70 on December 30, 2022, higher than the $964.40 closing level at the end of 2021. Platinum was the only precious metal with a double-digit percentage gain in 2022.
Palladium and rhodium prices fall in Q4 and 2022
Nearby NYMEX palladium futures moved 17.61% lower in Q4 and were down 5.97% compared to the 2021 closing level on December 30, 2022. Palladium was the worst-performing precious metal in Q4.
The chart of nearby NYMEX palladium futures illustrates the metal settled at the $1,798 level on December 30, 2022, lower than the $1,908.10 2021 close. Palladium had led the precious metals sector on the upside over the past years, so 2022 was a correction period for the metal.
Rhodium, a platinum group metal that only trades in the physical market, fell 14.39% in Q4 and was 16.78% lower in 2022. Rhodium was trading at a midpoint of $11,900 per ounce on December 30, 2022.
The prospects for precious metals in 2023
Gold and palladium prices rose to record highs in March 2022 when the yellow metal reached $2,072, and palladium peaked at $3,380.50 per ounce before correcting.
As we move into 2023, the following factors support the precious metals:
- The silver-gold ratio’s decline is a bullish signal for gold and silver prices.
- Gold and silver held up well in 2022, considering the price action in stocks and bonds.
- Geopolitical turmoil supports gold and silver prices.
- Worldwide central banks continue to add to gold reserves, validating gold’s role in the global financial system.
- The trajectory of U.S. interest rate increases is unlikely to continue at the same level.
- Gold and silver tend to thrive in inflationary environments. The war in Ukraine has caused considerable supply-side inflation immune to the U.S. Fed’s monetary policy tools.
- Russia is a significant producer of platinum group metals, increasing potential shortages in 2023.
- The World Platinum Investment Council projects that platinum will move into a deficit in 2023. As the demand exceeds supply, the price is likely to move higher.
Gold, silver, and platinum were stores of value in 2022, and I expect that trend to continue in 2023. The precious metals could surprise on the upside as investor sentiment is the critical factor for the path of least resistance of the price of the metals.
More Metals News from Barchart
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- Dollar Slides as Bond Yields Fall and Stocks Rally
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On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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