Once the darling of precious metals, platinum recently hit a 10-year low and many analysts think the bottom has finally been reached. Could now be the time to invest in platinum and ride the wave back up?
Our top 7 reasons why platinum may be primed for a major comeback
Just 10 years ago, the price of platinum was over $2,300 per ounce, putting it more than double the price of gold and nearly four times more expensive than palladium. Fast-forward to today and both gold and palladium trade higher than platinum, with gold, priced higher for only the second time in the last 30 years.
Platinum is currently trading below $900 per ounce, even though it costs about $1,100 to mine each ounce. There’s no way that miners will be able to sustain production like this, so supply could be dropping soon. In 2017, analysts at Thomson Reuters GMFS forecast a supply deficit of 275,000 for 2018.
Platinum is an industrial metal used in the automotive, medical, petroleum, glass and electronics industries and demand grows when the economy is stable, which is exactly what we’re seeing in many parts of the world. In China and India, demand is surging in the automobile sector and has created a deficit in the available supply.
There are only 250 tons of platinum produced each year, compared to 2,800 tons of gold. That makes platinum 10 times more rare than gold, yet it is currently priced at about 25% LESS than gold.
Platinum has a higher boiling point and higher melting point that palladium. It is also more dense than platinum. These factors make it stronger and more appealing as an industrial metal for many applications, which should drive demand.
The price of platinum has recovered in recent weeks following a crash all the way down to $793 per ounce, which was the lowest price since 2008 and its lowest level ever compared to gold. With the recent stability, platinum is catching the eye of speculators, who “are likely to rebalance their bets, creating upward momentum that will lift prices,” according to an analyst at Julius Baer.
A recent survey by Reuters of analysts and traders revealed an average price forecast for platinum of $1,039 by the end of 2018. That would put it up a whopping 23% from mid-July prices.