According to Barclays, Chinese first corporate bond default, which hit China-leveraged base metals (particularly copper), added to fears about China’s economy, instigated earlier in the week by weaker-than-expected Chinese economic activity data and weak Chinese trade data. The activity data in particular missed by a wide margin. 

 

Barclays’ economists lowered their Chinese Q1 GDP forecast to 7.3% y/y but kept their full-year forecast at 7.2%. 

 

Given that Barclays’ economists maintained their full-year growth forecast for China and that the possible scope for sanctions against Russia is still in question, Barclays thinks the potential for gold to sustain these recent safe-haven-driven gains for an extended period will likely be limited. In the short term, Barclays expects a stronger dollar to represent a hurdle for gold.

 

While gold has benefitted from the recent safe-haven bid, PGMs – and palladium in particular – have drawn continued attention from the Russia-Ukraine tensions, and palladium prices rose to levels not seen since April 2013 earlier this week. 

 

Elsewhere in PGMs, the strike in South Africa continues. Given the growing magnitude of lost production, it has certainly become supportive for prices, which have pushed past $1470 an ounce last week for the first time since September 2013. 

 

As long as the strike continues, and if the safe-haven bid for gold diminishes, we think the platinum-gold spread could rise from the roughly $100 it has averaged this week. This price puts the spread near its median over the past year, but Barclays believes that the dynamics are set for it to widen. Notably, weekly ETF flows have remained positive for gold for several weeks now, likely benefitting from the aforementioned safe-haven bid. 

 

Meanwhile, platinum ETP holdings are also positive, having scaled a new high at more than 2.78Moz, largely due to gains in the ABSA Capital New Plat ETF.