Platinum has begun to trend higher, recently hitting a two year high of US$1,037, after lingering in the shadows of gold and palladium.
Despite reaching heights not seen for 24 months, the price of the gray metal fell shortly after markets opened; it still remained above US$1,000 until midday.
The precious metals sector has benefited broadly from market volatility related to Iran-US relations and the trade dispute between Beijing and Washington.
The global unrest and uncertainty has been a tailwind for both gold and palladium, which enjoyed record-setting growth in 2019. However, the heightened interest in safe haven assets did not translate to the same price progress for platinum or silver.
After a phase one trade deal was reached and signed between the US and China on Wednesday (January 15), gold slipped slightly before regaining some traction, while platinum and palladium both increased.
“The market is uncertain regarding the deal between US and China, while somewhat weaker equity markets and weaker US dollar are (also) supporting gold prices,” Commerzbank (OTC Pink:CRZBF,ETR:CBK) analyst Eugen Weinberg told Reuters.
“The tariffs are not to be reduced any further until the US election cycle is over in November and that doesn’t help in bringing in the confidence into the market.”
With platinum at a discount compared to palladium (US$2,214 per ounce) and gold (US$1,549.50 per ounce), analysts are noting that it holds the most value.
“Platinum prices are expected to move sideways to higher over the course of 2020,” CPM Group’s Rohit Savant told the Investing News Network in December. “Investors remain unconvinced that platinum’s supply and demand trends are supportive of rising prices at this time. That said, the relative discount of platinum to palladium is keeping investors interested in this metal.”
Savant also pointed to several factors that could impede the growth of platinum throughout the year.
“A slowing global economy, a shrinking market share of diesel passenger vehicles, and the removal of a South African labor strike related supply disruption are expected to act as headwinds for platinum prices,” he explained.
However, Savant noted that the potential for partial substitution of platinum instead of palladium in the emission-reducing catalytic converters found in vehicles with combustion engines could be a significant market driver over the next 12 months.
Currently, platinum is trading for US$998, down from its earlier heights.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.