A lower estimate of first-quarter US GDP growth at 2.0% may have also affected investor interests in the industrial metals. The latest estimate was below expectations for the period and lower compared to the 2.9% growth in the final quarter of 2017 and in fact the lowest since Q1 of 2017. Economists ascribed poor consumer spending levels and a slower business inventory build for the lackluster performance.
The Trump tax cuts became effective early in Q1 and may not be fully appreciated until the current period, resulting in potentially higher growth in Q2. Also, the Fed’s preferred inflation measure, Personal Consumption Expenditures, rose 2.3% year-on-year in May to top it’s 2% target level which could validate the next rate hike anticipated to be in late-September.
Platinum prices weakened to their lowest value since January 2016 last week when the metal reached $814 an ounce; the price of the metal had previously fallen to a cyclical low of $763 an ounce at the trough of the economic contraction in October 2008.
The precious metals complex as a whole has seen sizable disinvestments in recent months on continued dollar strength but with platinum maintaining a $400 discount to gold and $100 discount to palladium. The rally in the US dollar which began in April and approached a recent high near $1.151/euro, down from an earlier $1.255/euro, continues to exert its influence on metal prices with both platinum and palladium down by nearly $200 an ounce each from early-2018 highs. Platinum averaged $941 an ounce in the first half of 2018, $100 above current value.
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