Platinum’s Fundamentals Remain Strong

After a major breakout early in March, Platinum has pulled back from psychological resistance at US$1,200 in a healthy consolidating move. The white metal has continued to trade above US$1,160 over the last week reflecting strong support even after a major breakout. 

With the rise of EVs and autocatalysts capable of reducing emissions, demand for Platinum is likely to strengthen over the short to medium term. The US, China and Europe are all reviewing emissions standards in 2021, which has boosted demand to the tune of 18% YTD. CME Group has put Autos as responsible for between 36-42% of global demand, behind Jewellery (26-35%), Other Industrial (21-26%) and Investment (15~%). Platinum’s association with autos is potentially set to continue with commentators increasingly, viewing platinum as a proxy for a greener economic recovery and the hydrogen economy. 

March has seen market updates from all three of South Africa’s largest platinum group metal producers, announcing that expansions in mining output wouldn’t be sufficient to cover significant supply deficits. Nico Muller, CEO of Impala Platinum, argues that “There is a very low risk of oversupply.” Others have argued that supply fragility poses risks to stable pricing of PGMs. These ongoing supply challenges have largely been reflected in a 10.6% YTD movement in the spot price.

In a recent interview, South African Technical Analyst Francis Hunt argued that Platinum retains much of the upside potential. Like Silver, Platinum is a monetary metal in an environment of extreme monetary easing, and simultaneously is seeing demand outpace supply as an industrial metal. On the technical side, Platinum remains a long way off ATHs at US$2,150, and has broken clearly out of a ten year falling wedge over the last months.

With growing demand and tightening supply, platinum is being adopted by precious metals investors as both a hedge based on its precious metal status, but also as an industrial metal with significant growth potential based on increasingly favourable supply demand fundamentals.  

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