Platinum shortages and rising demand: a trader’s dream forecast
By Paul Reid
29 September 2023
When it comes to commodities, the supply and demand mechanics are strong influencers of price. If there’s an abundance, the price is low, but when there are limited supplies, prices rise. Platinum is already considered precious, but it’s about to get a whole lot more desirable. Timing is everything. Traders can wait years for that perfect moment when prices are still low while supplies are dwindling, but the long wait may finally be over.
Platinum is fast becoming as rare as it is precious, and it’s only a question of time before the market realizes this. When that happens, traders holding platinum at current low prices will reap the reward of every price increase, and those who choose to stay away from metal investing will only watch with envy.
If you’ve never traded precious metals before, platinum might be the perfect introduction for you. Let’s find out why.
Platinum price: a buyers market?
At the time of writing, platinum (XPT) is sitting at a year-on-year low price of $889 (USD) per ounce. This figure is well within the average price range for the last 5 years, leaning to the low side.
COVID-19 temporarily crashed XPT prices down to $592 back in March 2020, but the rebound correction was aggressive, rocketing prices up to $1302 in less than a year. Since then, it’s been downhill.
As the saying goes, buy low, sell high. The all-time high is established. But what about the low? If scarcity modeling is anything to go by, we may never see such a low price ever again.
Platinum supplies are dwindling
Platinum is a precious metal used in a variety of industries, including jewelry and electronics, but, thanks to the global switch to electric vehicles, it’s also become a highly sought-after component in the automotive industry.
Coming out of the semiconductor crisis, automotive demand has grown at about 13% year on year, and it’s not slowing down. Car manufacturers are currently relying on above-ground supplies, but those reserves are not going to last.
The World Platinum Investment Council (WPIC) recently released its latest quarterly report, and it is forecasting a 2023 deficit of over a million ounces, which would be the highest on record. So, we're seeing rising industrial use and sustainable demand from the jewelry sector. This can mean only one thing – scarcity. Simply put, we are using more platinum than we are digging up.
The whole world is slowly turning toward EVs, and since our current platinum output is insufficient for today’s needs, the deficit is only going to get worse. And as scarcity increases, prices tend to go up.
What else could drive a price rise?
Like gold, platinum remains a popular investment asset for hedging against inflation, as its price tends to rise when the cost of living increases. This makes it a good investment for those looking to protect their wealth from inflation. Its price often mirrors gold, another precious metal considered a reliable haven against recessionary risks and economic volatility.
If a recession or downturn is on the horizon, many will choose to move their wealth to precious metals.
Platinum prices are at a temporary low, as much as 32% lower than at the start of this year. Platinum production is short by over a million ounces for 2023, and the need for platinum is rising fast. While recession fears are once again on the back burner, the price is ripe for large investors to park their wealth, and there’s nothing fundamental that could cause a platinum crash at the moment.
Whether you are a seasoned trader or new to online trading, platinum should be at the top of your list.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.
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