Platinum has returned as a precious metals star, delivery fat profits as investors rotate funds out of gold, the sector leader. Platinum’s sister metal palladium is also rising strongly.
Both platinum and palladium seem likely to continue outperforming as a decade of oversupply gives way to signs of a shortage developing.
A miner handles a piece of raw platinum ore in South Africa. Photographer: Waldo Swiegers/Bloomberg
Over the past month the platinum price has risen by 24% to a four-year high of $1218 an ounce, while palladium is up 13% at $1077/oz.
Gold, on the other hand, has risen by 1.5% to $3205/oz, though that modest move needs to be seen against a background of three spectacular years of soaring demand and an 83% increase from a price around $1810/oz in June 2022.
The platinum rebound has been a long time coming though some investors might remember that it wasn’t that long ago when the platinum price was comfortably higher than gold.
In mid-2008 an ounce of platinum cost $2068, more than double gold which was selling for $903/oz.
Demand for platinum and palladium has traditionally been driven by a combination of jewelry and industrial uses, especially for in the catalytic converters of internal combustion engines where they play a role in minimising the emission of environmentally damaging nitrous oxide.
Dieselgate Crash
But in 2015 the platinum market crashed after it was revealed that the big German car maker Volkswagen had been falsifying exhaust system measurement sparking a scandal dubbed Dieselgate.
Within months the platinum price had crashed to just $804/oz. Palladium, which is the preferred metal in the exhausts of gasoline powered vehicles, also fell but not as steeply.
Further weighing on the prices of platinum and palladium has been the rise in sales of electric vehicles, which do not require a catalytic converter – though hybrid electric cars do, and in some case their converters require a heavier coating of platinum or palladium.
A General Motors catalytic converters. (Photo by Reuter Raymond/Sygma via Getty Images)
But the major factor in this year’s platinum revival is as simple as the run-down of stockpiles which date back to the Dieselgate days meaning that newly mined supply is struggling to keep up with demand.
Mines in South Africa, the major source of platinum, have cut back during the years of low prices, as have the palladium mines of Russia which are the primary source of that metal.
A measure of the changing fundamentals of the platinum market came last month in a report from the World Platinum Investment Council (WPIC) which forecast a supply deficit this year of 966,000oz, the third consecutive deficit year.
More importantly, the latest deficit could put pressure on the platinum price because the WPIC is forecasting that the stockpile will shrink to 2.16 million ounces, enough to meet just three months of demand.
Stock Market Winners
The sudden shift in the platinum market, which has really been 10-years in the making, has sparked a sharp increase in the prices of platinum miners with the biggest beneficiary being Valterra Platinum, the renamed Anglo American Platinum.
Since listing earlier this month on the London Stock Exchange Valterra shares have followed the platinum price, up 24%.
Smaller platinum stocks have done better. Zimplats, a Zimbabwe-focused miner controlled by South Africa’s Impala Platinum has risen by 60% over the past month while Australian-listed Southern Palladium, which is planning to develop a new platinum mine in South Africa is up 120%.
