COMMODITY MARKETS IN 2020.

Byline: S.KAMAL HAYDER KAZMI

GOLD: International experts revealed that 2019 has been a golden year for precious metals as escalated trade disputes created a risk-averse environment among investors and demand for safe-haven assets increased. They expect the trend to continue in 2020 as most issues are still unresolved, even though both the US and China have been making efforts to prevent the situation from getting worse. Increased prices may continue to weigh on physical gold demand, particularly in emerging economies counting China and India. A stronger US dollar and higher import duties continue to add pressure on consumers. For platinum group metals, stronger demand from the automobile sector pushed palladium to a record high; however, the Pt/Pd ratio of almost 0.4 rise risks of substitution. They have also recorded that total known ETF holdings of gold increased by c.9.8mOz in 2019 as investors poured more money into the safe-haven asset.

Physical demand for gold took a knock in 2H19 as price-sensitive Chinese and Indian gold demand dropped. And the trend is probable to be similar in 2020 where the economic slowdown should keep disposable income under pressure. India's gold imports dropped 5 percent YoY to 642 tons over the first three quarters of 2019 (annualized c.830 tons) after falling 11 percent YoY to 872 tons for the full-year 2018 and could stay around 800- 825 tons in this year. In China, the PBoC was a major purchaser of gold in 2019, buying almost 3.1mOz of gold; however, the bank appears to have put a brake on its gold buying for now, which may keep Chinese demand under pressure too. Palladium has been the best performer in the commodity market with a gain of c.40 percent in 2019. It is also said that a key pillar behind palladium's stellar performance over recent years has been the persistent supply deficit and this has widened further.

The Experts don't imagine that's going to change much in 2020 and they will continue to see a sizeable supply deficit. The Nature of palladium supply is that it mostly comes as a by-product from platinum and nickel mines, leaving that supply more inelastic compared to the volatile demand picture. In recent eras, despite the price strength, both primary production and recycling growth has remained fairly stable. However, the demand picture has been more volatile, and more than 80 percent of palladium goes towards catalytic converters which have been the key driver behind stronger demand...