Ashly Dhani. . . Will the Downtrend Reverse?
What is the rarest precious metal in the world? If you answered gold, the all-time favourite precious metal, that’s incorrect.
Platinum is actually the rarest precious metal and another popular commodity among investors.
In recent years, however, the price of platinum has not reflected its rarity.
Despite being famously used in catalytic converters to help cars emit fewer harmful emissions, it has been struggling to break out from the weak trend of the past two years due to subdued demand, particularly from the auto industry.
Auto manufacturing makes up 44 percent of platinum’s demand.
While its precious metal cousin, gold, has repeatedly beaten its own record highs, platinum prices are still working their way up to $1,000 — about less than half of its all-time high price of $2,290 per ounce in March 2008.
It briefly reached over $1,000/oz early this year before falling again.
It briefly reached $1,105/oz on May 20, the highest price since May 2023 and the highest price so far in 2024, before retreating to below $1,000.
According to Reuters report, gold surged to another record high that day due to a range of factors, including US rate cut expectations and China’s new economic stimulus, which also lifted other precious metals, such as silver and platinum.
Platinum often benefits from rising gold prices.
The deficit in the platinum markets in recent years, however, has offered support amid weak demand.
Will platinum prices recover this year?
We look into factors that will affect the metal’s prices and explore analysts’ latest short- and long-term platinum price forecast.
Platinum Prices in 2023: A Sharp Fall Despite Deficit
In the turbulent four years since the onset of the Covid-19 pandemic in 2020, the platinum price trend has experienced a roller-coaster ride.
Platinum managed to recover from the lows of below $600 per ounce induced by the onset of the Covid-19 pandemic in March 2020 and even gained 11 percent overall in 2020 due to a widening deficit.
Lower supply due to Covid-19-related mine closure, the temporary shutdown of Anglo American Platinum’s Anglo Converter Plant (ACP) in South Africa, and reduced recycling caused a deficit of 932,000 ounces in the platinum market in 2020, according to industrial group World Platinum Investment Council (WPIC).
It was the largest annual deficit on record.
The lower supply outstripped the weak demand from the auto industry, jewellery, and industrial sectors as the Covid-related restrictions slowed activities.
In the following year, although platinum price hovered above $1,000/oz in the first half of 2021, it dropped more than 10 percent for the full year.
Weak demand from the automotive sector, which struggled with semiconductor shortages and logistical bottlenecks, combined with a surplus in the market as mine production recovered, dragged down platinum prices in 2021.
Data from the WPIC showed that the platinum market recorded a surplus of 1.29 million ounces in 2021.
In 2022, platinum price recouped its losses, gaining about 12 percent in the year, which was in line with gains in other precious metals.
Expectations that demand from China, the world’s biggest auto market and production hub, might improve after the country lifted its three-year strict Covid-19 restrictions boosted the market amid continued surplus.
Platinum price gave up its gains in 2023, dropping almost 7 percent in the year despite the market swinging back to deficit on the back of robust demand and constrained output.
South Africa, home to 70 percent of global PGM output, faced ongoing electricity supply shortages, strikes, and planned closures.
According to WPIC, the platinum market recorded a deficit of 878,000 in 2023. Total platinum supply fell by 2 percent while demand surged by 25 percent year-on-year.
Wahyu Laksono, the founder of the Jakarta-based trader community platform Traderindo, said the looming recession in the US due to the Federal Reserve’s hawkish monetary tightening and slower-than-expected China’s economic recovery hurt industrial metals, including platinum and palladium. — Techopedia
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