On October 25, 2024, Max Layton, the head of commodities research at Citi, shared his expert analysis on CNBC’s “Squawk Box,” where he discussed the price movements of gold, silver, and other hard commodities.
Layton said that gold and silver prices have exhibited impressive gains, even as several traditional indicators moved against them. Despite factors such as higher interest rates, strong payroll data, and a downturn in Chinese imports during July and August, both gold and silver have continued to rise. According to Layton, this resilience suggests a solid underlying market trend. He mentioned that China’s re-entry into the market in September likely contributed to these gains, as negative price premiums in China might not fully capture the consumption dynamics.
Layton’s view is that the best periods for gold and silver over the past two decades have occurred when developed markets like the US and Europe were weakening, and when China was in a phase of economic easing. “This is the best setup for gold and silver in a decade,” Layton stated, expressing confidence in a sustained upward trend.
When discussing palladium, Layton acknowledged the metal’s recent price surge, reaching levels unseen since December of the previous year. However, he expressed caution about the medium-to-long-term outlook. Layton pointed out that China’s rapid increase in electric vehicle (EV) penetration, which grew from 30% to 55% over the past 12 months, poses a significant threat to palladium demand. Palladium’s primary demand stems from internal combustion engine vehicles, which are losing market share to EVs. This shift, Layton says, is a structural challenge for palladium’s long-term prospects.
Layton believes that in the short term, palladium’s performance has been buoyed by supply concerns, particularly due to geopolitical tensions in Russia and production disruptions in North America and South Africa. Layton thinks that these supply-related factors could continue to support palladium in the near future, but they do not change the bearish long-term outlook.
Turning to platinum, Layton explained that the metal has not offered substantial gains, even in favorable conditions such as declining real interest rates and economic uncertainties in developed markets. In his opinion, platinum has failed to provide exposure to either the risks of recession in developed markets or the growth potential in emerging markets. Layton added that platinum faces additional challenges from the increasing popularity of electric vehicles. While acknowledging that both palladium and platinum have performed well recently, he cautioned that investors are likely to see these rallies as opportunities to offload their holdings rather than long-term investment prospects.
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