(Kitco News) - Despite oil’s downward pressure on commodity prices since the start of the year, with Bloomberg’s Commodity index falling to levels last seen in 1991, analysts from one U.K.-based research firm note that gold has managed to shine; and, say precious metals should continue to benefit from market uncertainty.
“Gold prices rose by more than any other commodity on the back of safe-haven demand generated by the turmoil in global financial markets [in January],” said analysts from Capital Economics in a research note Monday afternoon.
A major factor expected to weigh on gold prices this year is further U.S. monetary tightening, they noted. However, given current market volatility, markets are now expecting the Federal Reserve to delay its next rate hike until later in the year, which should help gold. 
“Indeed, combined gold imports by China and India surged in December, up by 116% y/y, as low prices stimulated buying in the two biggest consumers. Meanwhile, preliminary data show that buying of gold by global central banks remained strong in December, with Russia and China adding 22 and 19 tonnes of gold to their reserves, respectively,” the analysts noted as other supportive factors for the yellow metal.
In a Capital Economics report released earlier this year, the analysts said they even expect gold prices to end the year at around $1,250 an ounce, nearly 11 % higher from where prices are today.
January saw investors flock to gold in search of a safe-haven amid weaker global equity markets and oil prices. The metal has pushed back above $1,100 an ounce and April Comex gold futures were last quoted 0.07% down at $1,127.20 an ounce.
Silver has also managed to benefit so far this year, despite the industrial component to its price, as gold pushed it higher. Prices are up 3.4% so far this year with March Comex silver futures last quoted down 0.37% at $14.29 an ounce.
“Indeed, the latest data released by the USGS suggest that U.S. demand for silver in electronics fell sharply in 2015. However, low prices have already stimulated retail investment, with demand for U.S. silver coins reaching the highest level in three years in January,” they said.
In fact, the latest U.S. Mint data showed that American Eagle silver coins sales were up 7.68% year-over-year at over 5.95 million ounces in January, its highest level since January 2013.
Precious metals as a whole diverged in January, the analysts continued, with palladium posting the most losses.
“Palladium was the biggest loser, as abundant above-ground stocks and the latest financial market turmoil in China weighed on prices,” they said. “However, the price of palladium appears to have now fallen beyond what could be expected based on China’s unofficial manufacturing index and car production alone.”
Palladium futures had a rough start to the year but have managed to steadily rise since mid-January. March Comex palladium futures were last down$9.90 at $492.45 an ounce. Meanwhile, platinum futures were last quoted down $12.90 at $857.20 an ounce.
By Sarah Benali of Kitco News; sbenali@kitco.com
Follow me on Twitter @SdBenali
