How High Can Platinum Prices Go?

Prices for a number of different metals have rallied in recent weeks, and platinum prices have been no exception. The metal is up 14.83 percent so far in 2016, and gained another 2 percent on Monday to rise above the $1,000-per-ounce mark.
As per Business Day Live, that’s the highest platinum prices have been since October 23, 2015. Shares of South African platinum producers Lonmin (LSE:LMI) and Impala Platinum (JSE:IMP) were up 19.75 percent and 9.97 percent, respectively, on the back of the increase in platinum prices.
That’s no doubt leading plenty of market watchers to question just how high platinum prices could go. Certainly, gold prices have been on a tear as of late, and good fortunes for the yellow metal have been known to help lift the rest of the precious metals complex.

But HSBC analyst James Steel told The Bullion Desk recently that there’s more to rising platinum prices than an increase in gold prices. “While platinum has taken its cue from gold, there are fundamental arguments that support the PGMs. It is perfectly feasible that platinum and palladium begin to take more direction from better industrial and good auto data,” he said.
Certainly, the World Platinum Investment Council (WPIC) would agree with that statement. In its latest quarterly report on platinum, released on March 2, the WPIC states that the metal ended 2015 in a 380,000-ounce deficit, due in part to a 5-percent increase in auto demand. A smaller 135,000-ounce deficit is expected for 2016, based on higher recycled supply, slightly weaker auto demand growth and a return to demand growth from the jewelry sector.
“Today’s Platinum Quarterly clearly shows that the fundamentals of the platinum market are sound,” said WPIC CEO Paul Wilson in a statement. “Demand from all sectors remains robust, supported by growth in European diesel platinum demand and resilient jewellery demand in Asia. It is encouraging to see that personal disposable income — which is linked to China jewellery consumption — is growing at a rate almost double that of the overall economy.”

So where are platinum prices headed in 2016? According to FocusEconomics, the jury is still out. “Our panel is split on how prices will evolve going forward,” the firm’s latest report reads. “Just under half of our panelists see prices rising from their current level, while the rest see prices losing ground.”
The average forecast for platinum prices in Q4 2016 stands at US$981. ABN AMRO Group (AMS:ABN) put forward the lowest forecast at $875, while JPMorgan Chase (NYSE:JPM) had the highest platinum price prediction at US$1,200. Most other platinum price forecasts fell closer to $950.
Still, looking a bit further into the future, the panel expects prices to rise; the average platinum price forecast for Q4 2017 came in at US$1,092.

 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.