Platinum's Quiet Move Higher
Andrew Lane | Apr 21, 2021 08:51AM ET
2020 was a strange year for all, but the volatility in platinum was a stand out for most. In Q2, Q3 and Q4 platinum posted supply/demand deficits with the end of 2020 hitting a deficit of -170 koz. Platinum price has benefitted mainly due to the rebound in demand in automotive, industrial and jewellery sectors. During 2020 platinum’s ratio against gold hit an all time low as demand during Covid collapsed chiefly due to the slump in car sales across the globe during lockdown. However it has since recovered from the lows of $575/oz in March 2020 to more than double at the current levels of around $1200/oz.
As you can see on the weekly chart above, this $1200 level however is pivotal for platinum. When you consider the long term charts, and the recent consolidation, platinum appears to be building a base around this price, and a break above $1200 is expected in the coming months. Platinum tends to front run the metals as inflation creeps in so is always a good barometer of what is to follow. Bear in mind, only 13 years ago platinum was trading at over $2000/oz, considerably above its sister metal palladium at the time.
It is worth bearing in mind that the vast majority of platinum comes from the South African mines, and they were shut for an extended period of time as Covid ravaged through the workforce. Current lack of supply would suggest the mines are yet to catch up with the increasing demand in a new form for platinum, which comes from fuel cells. There has been a rapid increase in the demand and consumption of platinum from South East Asia who have been working on the latest technology to rival electric vehicles. Biden’s green plan will also use platinum heavily over the next few years, so we would expect the fundamentals to only provide a floor in the current price.
As we have seen the Platinum/Gold ratio fall to its lowest in March 2020 for many years, as well as palladium trading at more than twice the price, one has to wonder when the platinum price will break to the upside. The chart for platinum shows a very healthy looking bull flag pattern and the next price target looks to be around the $1600 level. There is every possibility that given the demise of the dollar, the resulting commodity bull run and strong demand, platinum could well be hitting all time highs again in the next few years.
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