Make Kitco Your Homepage

Gold and silver traders shouldn't ignore the growing value in platinum

Kitco News

Editor note Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day's top stories directly to your inbox. Sign up here!

(Kitco News) - While most traders and investors have been laser-focused on gold and silver, they are ignoring a precious metal that could be essential over the next ten years.

Investors continue to overlook the growing potential of platinum as the market faces a record deficit of one million ounces this year, according to the latest estimates from the World Platinum Investment Council.

According to the council’s latest report, a perfect storm is brewing for platinum as industrial demand continues to grow in an environment of stagnant supply growth. The report noted that total platinum demand in the second quarter year increased 27% compared to the second quarter of 2022; at the same time, automotive demand rose 19% compared to last year.

The automotive sector represents about 80% of global demand for the precious metal. Platinum is a critical element in catalytic converters, which are used to reduce harmful emissions in diesel and gasoline-powered engines.

While the auto sector will remain a source of solid demand for platinum, the burgeoning Green Hydrogen economy will put further pressure on the growing supply deficit. Last week, Kitco News highlighted a report from Bank of America that projected the Green Hydrogen economy could consume 2.4 million ounces of platinum annually by 2030.

But platinum prices continue to struggle despite this growing fundamental supply/demand imbalance. Platinum prices are heading into the weekend near a three-week low below $900 an ounce. Roughly a decade ago, gold prices, which used to trade at a discount to platinum, started to trade at a premium. The price spread between gold and platinum is now at its widest level in recent history.

While platinum could continue to struggle as most investors ignore the broader precious metal sector, it is starting to attract some attention from analysts who see potential value in the precious metal.

“We see no justification for the current weakness of the platinum price given the record-high supply deficit and envisage a significant price recovery to $1,100 per troy ounce by year’s end,” said commodity analysts at Commerzbank.

Robust U.S. economic activity to support dollar, weigh on gold prices next week

Analysts at TD Securities said we could see lower prices in the near term; however, they also noted that speculative positioning has reached “max-short” territory.

According to some analysts, platinum is taking its direction from gold, like most precious metals, as the yellow metal remains trapped in a well-defined trading range.

Central Bank gold demand remains solid, with China buying another 29 tonnes in August, extending its buying spree to 10 straight months; however, investors are reluctant to make any bullish bets on gold as the Federal Reserve maintains its hawkish bias and keeps interest rates at elevated levels.

Although the Federal Reserve may pause its tightening cycle, many analysts have said that gold will remain trapped until there are clear signals the central bank is ready to cut rates. So, until then, we continue to wait; however, it might be wise to keep an eye on platinum as that value trade continues to grow.

That’s it for this week. Have a great weekend.

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.