Platinum: Where is it Heading?

Platinum is seizing the attention of the bullion market and finally emerging from a prolonged period of underperformance. After 14 years of lagging behind gold and palladium prices, platinum has broken structure and pushed up over 40% year-to-date, reaching four-year highs and today sits at $1967.43 spot. Narrow supply and revived industrial demand has spotlighted platinum as an undervalued asset and are factors for its current rally.

Between 2000-2004 prices lingered between $600-800 per oz, peaking at over $2400 in 2008 before plummeting during the global financial crisis. In 2011 another high at $2000 followed by a 10 year slump in price, bottoming out near $900 in 2020. The current price action signals a potential reversal and end to this long-term downtrend, potentially a new and bullish era for platinum prices we saw during previous highs.

Supply is critical in platinum's price surge. Global production is set to decline during 2025 by 5%. South Africa and Russia production of platinum accounts for a substantial portion of global output and contraction in supply here is couple with reduced US production.

Demand for platinum has rivalled gold in the jewellery sector, notably in Chinese platinum imports topping 11.5 metric tons in April alone. This is reflective of the industry seeking affordable alternatives to gold due to its soaring price. Platinum's role in catalytic converters in the automotive industry and its potential in hydrogen fuel cell technology, are strengthening its demand profile.

Investor sentiment is also turning positive. The creation of Valterra – previously Anglo American's platinum division, was valued at over $11 billion on debut on the London Stock Exchange. Zimplats Holdings Limited, Zimbabwe’s premier platinum producer has had bullish breakout price action which is mirroring the current upward trend in platinum’s price. A rise in trading volume in platinum mining shares overall is also notable.

Platinum’s future depend on the pace of supply, the rate of adoption of hydrogen fuel technologies as well as macroeconomic conditions influencing the precious metals market. The current momentum suggests that platinum is poised to reclaim its status as a valuable component in a diversified precious metals portfolio. This presents an opportunity for us to reassess platinum's role in our holdings. Its unique supply/demand dynamics and potential for further growth warrants attention as both a hedge and a growth asset in the evolving fiscal landscape.