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Platinum's Tide Is Turning - World Platinum Investment Council

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(Kitco News) - Although platinum remains the laggard within the precious-metals complex, it is starting to catch up as platinum continues to see unprecedented investor demand.

Trevor Raymond, director of research with the World Platinum Investment Council

In a recent interview with Kitco News, Trevor Raymond, director of research with the World Platinum Investment Council, said that the tide could be turning in platinum’s favor with resurgent interest in platinum’s demand growth potential.

Investment demand has been the critical factor behind the metal’s new bullish momentum. Raymond noted that in the council’s quarterly supply demand publication, investment demand through exchange-traded products totaled 690,000 ounces in the first three months of the year.

“That was the largest increase in ETF holdings in any three-month period since the launch of physically backed platinum ETFs in 2007,” he said.

He added that the trend has continued into through the second quarter. While quoting listings data, Raymond said that EFT holdings have increased by more than 750,000 ounces as of July.

“The magnitude and speed of the buying indicate this is institutional money taking big positions in the platinum market,” he said. “We haven’t seen this type of buying since 2014.”

Although institutional investors very familiar with platinum are jumping back in, Raymond said that retail and newer institutional investors remain on the sidelines. He added that he expects the broader investment market to move back into platinum when the metal sees a more published evidence of demand growth from more diesel cars on Europe’s roads, traction in heavy-duty fuel-cell trucks and increased use of platinum in gasoline cars to replace scarce and pricey palladium.

Platinum’s automotive demand has suffered the last three years because of the 2015 diesel emissions scandal. Platinum is the main component in diesel-engine emissions control.

Raymond noted that this issue is starting to become less of a factor in the auto sector; however, he added that a more significant factor for platinum is its potential substitution, at a one-to-one ratio, for palladium.

Many analysts have noted palladium’s meteoric rise in the precious-metals space as prices have risen in the face of strong industrial demand in gasoline vehicles and unresponsive supply. Although many companies have been hesitant to confirm that they will substitute palladium with platinum, Raymond said that they might have already done so due to availability and price concerns.

“Regardless of the price difference, there is not enough palladium supply to meet automotive needs so some companies will be forced to turn back to platinum,” he said. “Substitution has happened before, and it can happen again.”

The WPIC sees a platinum surplus of around 375,000 ounces for this year, but Raymond said that it wouldn’t take a significant rise in demand to reduce the metal’s excess.

Tuesday, platinum is seeing some modest selling pressure as some investors take profits after the metal posted a three-month high last week. October platinum futures last traded at $878 an ounce, down 0.44% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.