Of all of the precious metals traded on the futures markets (gold, silver, platinum and palladium), it seems that platinum is in a group by itself as it has consistently risen for the last three consecutive weeks. In fact, three weeks ago, platinum futures open just below $1100 per ounce at $1096. Today platinum gained a total of $26.20, this basis the most active April 2021 Comex contract and is currently fixed at $1283.90.
One of the most impressive moves in the precious metals has to be platinum, considering that back in March 2020 when all of the precious metals had hit their lows and gold was trading at $1450 per ounce, platinum traded to an intraday low of $560 per ounce. That means in the time the gold rose from $1450 to current pricing platinum has more than doubled in price. In regards to the underlying reasons why we have seen platinum move so strongly to the upside it is simply a lack of supply and rising demand. The vast majority of platinum is mined in South Africa which produces roughly 80% of the world’s supply. Another factor that is key to the recent move in platinum is it is the only precious metal that has the properties which converts unburned hydrocarbons into carbon dioxide and water vapor. In fact, the demand from the auto industry accounts for the use of the vast majority of platinum production.
There is a new major application that will only increase the demand for platinum and that is in the automotive industry in which platinum demand will increase substantially. That is the bridge between modern gas-powered engines into electric vehicles, platinum is being researched to help make batteries more capable of meeting demands of transportation. Also, as a medium hybrid diesel engine which produce much less greenhouse gasses. Another type of engines has seen an increased growth especially in China. According to Trevor Raymond director of research at the World Platinum Investment Council, “Currently, most battery electric vehicles are no cleaner than an efficient modern diesel. Fuel cell electric vehicles are a very clean transport alternative, that will contribute to reducing global warming, when fuelled with green hydrogen. This technology depends upon the use of platinum.”
According to Reuters platinum has now risen to a six-year high this based upon the assumption that there will be a robust auto recovery after the pandemic sides. Platinum jumped over 3% yesterday and gained almost 2% in trading today.
According to Bart Melek, head of commodity strategies at TD securities said, ““We’re expecting demand for autos to increase globally as we move into a recovery phase. He also added that,” higher standards for pollution control will require more of the metal.”
He is not alone in his market sentiment as the major refiner Johnson Maffei said that both platinum and palladium which are using catalytic converters to clean car exhaust fumes could see supply shortfalls this year. With the volatility that has been intrinsic to silver, which is concurrently occurring with a narrow and bearish demeanor in gold, platinum seems to be a very solid choice in terms of investment in the precious metals.
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Wishing you, as always, good trading and good health,