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AI boom could feed precious metals' demand: Metals Focus

The artificial intelligence (AI) boom could support industrial demand for precious metals next year, although high interest rates and economic concerns may be near-term headwinds, Metals Focus said on Wednesday (Oct 25).

Viral chatbot ChatGPT has made generative AI a buzzword this year, fuelling a boom in demand for chips powering the technology and boosting stocks of manufacturers such as Nvidia.

Since most components used in conjunction with AI devices are sophisticated, “we expect to see widespread support for a range of precious metals bearing components,” Metals Focus said in a note to investors.

“Expected upside from several applications that are gradually maturing should help support the recovery in industrial offtake next year.”

To cope with the evolution of AI algorithms, shipping growth for AI servers and switches will rise by double digits over the next few years and stimulate precious metals demand, Metals Focus said.

Demand will rise for platinum alloys used in chip manufacturing, silver-palladium Ag-Pd multi-layer ceramic capacitors (MLCCs) in high power components, gold bonding wire in chip and memory packages, gold plating in printed circuit boards and palladium plating on lead frames, it added.

Spot gold prices have climbed about 9 per cent in the past two weeks, mainly fueled by safe-haven inflows triggered by the Israel-Hamas conflict, providing a tailwind for other precious metals as well.

High interest rates have restrained overall gains in the non-yielding asset this year, while economic concerns could dampen buying of the metal in physical markets.

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