Gold grabs the headlines and platinum less so but it is interesting to note that the platinum price has surged by a far bigger percentage than gold.
Increased global risk owing to the Covid-19 pandemic has driven strong investor demand for gold as a risk hedge, with gold ETF holdings up over 20%, or $50-billion, already in 2020.
Although the price of gold is up 28% in 2020, rising to a new record high of $2 067 on August 6, and outperforming almost all other asset classes this year, what may have gone unnoticed is that, since the platinum price low of $599/oz on March 19 and the gold price low of $1 474/oz, platinum has significantly outperformed gold, rising 55% versus gold’s rise of 33% by the end of August.
Investor sentiment towards platinum is turning positive, the World Platinum Investment Council (WPIC) research director Trevor Raymond told Mining Weekly in a telephone interview.
WPIC’s members are Anglo American Platinum, Impala Platinum, Northam Platinum and Royal Bafokeng Platinum.
Platinum’s price outperformance of gold is no anomaly. Over the two years from the price lows of the Global Financial Crisis in late 2008, platinum’s weekly returns outperformed gold’s by between 30% and 65%. Platinum’s performance was not solely owing to growing investment demand; exceptionally strong platinum jewellery demand and limited supply growth maintained positive investor sentiment despite very weak automotive demand. During 2020, platinum market fundamentals have improved appreciably, with strong buying in China on the Shanghai Gold Exchange and direct platinum imports.
Platinum’s longstanding strong correlation with gold has rebounded to over 0.7 since Covid unfolded. Consequently, many more gold investors could consider platinum as a proxy for gold on that correlation alone, with the added potential outperformance of platinum a further enticement.
While Covid negatively impacted the world economy on an unparalleled scale, investment demand for platinum strengthened in Q2 2020 – as the combination of increased global risk and monetary and fiscal policy responses to the crisis boosted the appeal of precious metals, including platinum.
Platinum Quarterly reports a revised 2020 forecast that has moved the platinum market into an annual deficit of -336 000 oz compared to the prior estimate of a +247 000 oz surplus. Total platinum supply in 2020 is now forecast to fall by 14% to 7 102 000 oz and reflects a 15% (-910 000 oz) decline in refined production and a 12% (-250 000 oz) decline in recycling supply.
Supply in the second quarter of 2020 fell by 35% year-on-year (-748 000 oz) to 1 408 000 oz. The second quarter bore the full supply impacts of a major smelting process outage and Covid-driven mining lockdowns in South Africa. Platinum recycling in Q2 2020 was also severely impacted by Covid-related logistics disruptions.
Second-quarter demand fell by only 19% year-on-year (-387 000 oz) to 1 599 000 oz, and was also only 2% (-36 000 oz) down on first quarter levels.
The positive trend in exchange traded fund demand growth in the second quarter is expected to continue over the remainder of the year, during which period continued year-on-year gains in bar and coin demand is expected. Positive platinum market fundamentals, including a forecast deficit, demand growth potential and price discounts to gold and palladium, are expected to provide added attraction to platinum from an investor perspective.
Industrial demand remains least affected by the pandemic owing to capacity growth in the glass sector, plus resilience in platinum’s pandemic-related uses in the medical sector.