(Kitco News) - A perfect storm appears to be brewing in the platinum market as growing investment demand meets ongoing supply deficits.
After a relatively slow start to the year, platinum prices have surged as investors move down the value chain in the precious metals market. October platinum futures last traded at $1,390.40 an ounce, up more than 50% so far this year, with most of the gains coming since early June. Meanwhile, December gold futures are trading near record highs at $3,686 an ounce, up 32% on the year.
“Platinum is expected to see its third year of supply deficits, but it's the price action that has attracted all the attention in the second quarter,” said Edward Sterck, Director of Research at the World Platinum Investment Council. “Investors are starting to recognize platinum’s value in the precious metals.”
While investment demand continues to improve, the report noted that tariff and trade-induced volatility have weighed on the sector. Investment demand saw a net outflow of 64 koz in the second quarter.
In its second-quarter report, the WPIC said the platinum market is expected to see a supply deficit of 850,000 ounces this year, down slightly from the previous estimate of 966,000 ounces and from 2024’s deficit of 968,000 ounces.
Although platinum’s deficit has narrowed, the report noted that supply still cannot keep up. Total platinum supply for the year is expected to fall 3% to slightly more than 7 million ounces, its lowest level in five years.
While slowing economic growth could continue to weigh on industrial demand, Sterck said it is difficult to see a scenario bad enough to reduce demand to a level that balances the market.
“The current deficit represents about 15% of annual global demand,” he said. “I don’t see the economy weakening enough to impact 15% of global demand. A bigger contraction in the economy probably leads to a weaker U.S. dollar and a stronger gold price, and that will be beneficial for platinum in a play-through effect.”
At the same time, he said platinum prices are still not high enough to encourage more supply to come onto the market.
“The miners’ ability to flex out more production is extremely limited,” he said. “We are nowhere near a price that will incentivize companies to bring on new production.”
According to the report, industrial demand increased to 513,000 ounces, up 41% from the first quarter; however, demand is expected to fall 24% for the year.
Although a slowing global economy is weighing on industrial demand, investment demand is picking up, particularly in the jewelry market. The report said that in the first half of the year, platinum jewelry demand grew to 1.2 million ounces, hitting its highest level since the first half of 2015.
“For full year 2025, jewellery demand is expected to exceed the recovery seen in 2024, increasing by 11% year-on-year to 2,226 koz, as platinum continues to benefit from its price discount relative to gold,” the report said. “Forecast growth in China is especially noteworthy, up 42% year-on-year to 585 koz, while Japan will see a healthy 5% gain. European and North American demand is forecast to grow 7% and 8%, respectively, to reach record highs.”
Meanwhile, Chinese investors are driving bar and coin demand.
“A dramatic surge in China bar and coin demand elevated total bar and coin to 109 koz, up 55% quarter-on-quarter, while demand for bars of or above 500g in China grew 33% quarter-on-quarter to 47 koz,” the report said. “However, neither this growth, nor ETF inflows during the quarter, were sufficient to offset the impact caused by the outflow of stocks held by exchanges.”
Despite ongoing market volatility, the WPIC said that there is still an investment case for platinum.
“Looking to the remainder of 2025, platinum’s investment case remains compelling as prices appear to be consolidating gains with the platinum market remaining in deficit, albeit as mine supply sequentially recovers after a depressed start to 2025,” they said.
