Demand from the car and jewellery industries will not offset a lack of demand from investors
Prices of precious metals platinum and palladium are likely to peak this year, as the market lacks the support that gold draws from investors, a survey said on Monday at the start of London’s annual platinum week.
Both metals, which are used in auto catalysts as well as in jewellery, are likely to fall short of their 2014 highs, according to Metals Focus, a leading metals consultancy.
“Ultimately, neither the fundamental market conditions nor the investor activity that would be needed to drive a more decisive bull market seem likely to emerge over the next few months,” Metals Focus said.
Unlike gold, which has jumped 21 per cent since January driven by investor purchases of exchange traded funds backed by the metal, there is little investor appetite for palladium and platinum, the group said.
“Inflows into ETFs or futures have so far been modest and our field research also confirms lacklustre interest,” they said. “Indeed, it seems that the bulk of the price recovery seen in the two metals has been due to short covering rather than buying.”
Platinum, which is used in jewellery and autocatalysis for diesel cars, has shot up 19 per cent this year after hitting a seven-year low in January of $806 a troy ounce. Meanwhile, palladium recently traded at $589.98 a troy ounce, 6 per cent stronger for the year.
Platinum and palladium prices should peak at $1,200 and $750 respectively before the end of the year, Metals Focus said.
While it forecast deficits for both metals this year, it notes there are enough stocks of the metal above ground around the world to prevent any “acute tightening” in the market.
Norilsk Nickel, the world’s largest miner of palladium, said on Monday it had begun purchasing the metal on the market in a move designed to reduce volatility.
Demand growth for platinum remains weak, amid a slowdown in China that has hit jewellery consumption. Auto demand for platinum is projected to fall 1 per cent this year, while jewellery consumption is likely to rise by the same amount, according to a separate report from the World Platinum Investment Council.
In addition, if electric cars continue to gain market share, that could damage the longer-term demand outlook for platinum and palladium. Every extra 1 per cent of global passenger car production that electric vehicles claim in 2020 could lead to the loss of about 100,000 ounces of precious metals demand, Metals Focus estimates.
“The recent success of Tesla’s presale campaign and the growing focus of mainstream car manufacturers on battery electric vehicles suggest there are clear upside risks to production,” it said.
A key question, however, for the longer-term demand of platinum is the success of fuel cell vehicles, which convert hydrogen to electricity and require platinum catalysts.
The World Platinum Investment Council said it had seen a “marked increase” in the number of investors asking it about platinum and its role in fuel cell vehicles.
SOURCE: Henry Sanderson – next.ft.com
