Platinum has had a stellar run so far with the market breaching the psychological $1,200 per ounce earlier this week. On Thursday, it touched a six-year high of $1,270. Although prices are now somewhat correcting because of possible profit taking, experts feel there is still some steam left in the metal.
It appears that platinum has got out of gold’s shadow with the price differential narrowing to around $600/oz — a condition seen about a year ago. Even as gold is under downward pressure having fallen to around $1,815/oz, platinum is showing promise as ETF inflows continue and financial investors seem to opt for it.
Clearly, the platinum market was in a state of supply deficit last year, according to the assessment of Johnson Matthey, the world’s largest refiner. This deficit came on the back of another short supply a year earlier, too. Worse, the World Platinum Investment Council has predicted a record deficit of 1.2 million ounces for 2020. No wonder, the market is playing catch up.
While there is no specific forecast yet for 2021, for all intents and purposes the market will continue to remain in deficit and only the quantum has to be worked out. In the event, investment demand will remain robust. ETF inflows are also expected to gather pace.
Market participants continue to believe that platinum is under-valued in relation to gold. Given the tight market, platinum still has some course to run.
Platinum’s sister metal palladium, too, is facing supply shortfalls. In 2020, the market showed a relatively smaller deficit, according to Johnson Matthey with the deficit roughly 50 per cent bigger the year before.
The smaller deficit last year can be explained by the adverse impact of the pandemic on the global automotive industry which faced a slump because of national lockdowns and shuttering of production units. After all, the automotive industry accounts for close to 85 per cent of the overall demand for the metal.
Palladium has been in deficit for many years now and this year (2021) is likely to be no different. The metal is trading around $2,350/oz.
The author is a commodities market specialist. Views are personal
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