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The precious metal, which has traded significantly lower than its platinum group metal (PGM) cohort palladium, is poised for growth this year.
This could be the best year for investors to get into the platinum market since 2014, a recent report from the World Platinum Investment Council notes.
The precious metal, which has traded significantly lower than its platinum group metal cohort palladium, is poised for growth this year driven by increased investment demand and exchange traded funds (ETF) purchases.
The council also expects moderate levels of platinum substituting palladium in the automotive sector as another tailwind for the sector.
“We believe that the fundamental drivers of value for platinum are being more widely considered and that the current investment case for platinum is more compelling than at any time since the launch of the WPIC in 2014,” the market overview notes.
It continued, “Supply remains constrained despite the significant increase in the price of the basket of metals sold from platinum mining in Southern Africa and nickel mining in Russia.”
Platinum reached its peak price point this year on January 17, when it was trading for US$1,022 an ounce. Subsequently, the price fell in mid-February and has been locked below US$900 since the end of the month.
The grey metal is projected to begin gaining due to rising demand and a potential supply crunch.
“There is insufficient confirmed capital investment to support a meaningful increase in the supply of platinum or palladium in the next 5 years,” reads the industry report.
While displaying optimism for the price growth throughout the calendar year, the council is still cautious. The COVID-19 coronavirus could impact the metal’s ability to make substantive gains, with the platinum jewelry sector likely to be disproportionately affected due to a decrease in purchases and store visits in China.
A key driver of platinum demand in 2020 could come from the automotive sector, which relies heavily on palladium at present to bolster the emissions reduction capacity in catalytic converters.
Some analysts believe the substitution would be much harder than simply swapping one for the other, but the WPIC remains confident it can and will be done this year.
“Details of this substitution remain proprietary and extremely confidential,” wrote Paul Wilson, CEO of WPIC. “Fortunately, autocatalyst fabricators, including Johnson Matthey, are acknowledging that substitution can be done and is happening.”
All in all, the council remains hopefully that the metal will make gains this year as long as COVID-19 is contained in the next few months and economic growth restarts.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.