Review of the platinum market for the first quarter and growth prospects in 2021

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The so-called “white gold” is used in the automotive industry, the chemical industry, electronics, the oil and gas industry, jewelry and other segments of the economy. The jewelry industry forms only about 30% of the total demand for metal, while 40% comes from demand from automakers. Just a few years ago, platinum was the most expensive precious metal on the market, but in recent years the situation has changed dramatically. Metal futures are trading at multi-year lows today, showing consistent negative dynamics since 2011.

Updated forecasts. How supply and demand will change in 2021

It is planned that a total of 7.8 million ounces of platinum will appear on the market. This means that, on an annualized basis, the increase in the amount of valuable metal on the market will be at least 16%. According to the same calculations, investment demand will reach 8 million ounces, which is 5% more than last year’s figure. That is why it is assumed that the deficit will remain until at least 2022.

What causes the changes in expert forecasts? Firstly, the appearance on the world market of 20% (additional 988,000 oz) of metal from refining and additional secondary supply (+3%/64,000 oz).

Who is the main buyer creating demand for platinum in such volumes? Of course, not only investors. The previously mentioned 5% will come not so much from them, but from the industrial sector (486,000 ounces), the automotive industry (an additional 557,000 ounces) and the jewelry industry, which will require +158,000 ounces. All of the above items fully compensate for investor requests, which may decrease (-823,000 ounces).

According to the forecast, annual aggregate investment demand will be lower than in 2021 by 53%. However, this fall will not affect bullion, investment coins and products offered on exchanges. Nowadays, a lot is written about the fact that the demand for platinum will grow, since the market has long been expecting a recovery from the crisis caused by the pandemic and the subsequent lockdown.

Being in nature. Isotopes

World reserves of platinum are small. The metal content in the earth's crust is 5 · 10-7 wt.%. It is found both in pure form and in compounds. The most important minerals are polyxene, which contains 6...10% iron, as well as palladium platinum, ferroplatinum, iridoplatinum, sperrylite PtAs2, as well as a number of more complex chemical compounds, including nickel, sulfur, palladium. The most famous of these minerals is braggite. It occurs together with copper and iron pyrites in contact with gold ore, crystallizing in cubic or, less commonly, octahedral form. Braggite has a metallic luster and also contains traces of rhodium and antimony.

To date, scientists have discovered quite a lot of isotopes of this element: 6 natural and 37 artificial. Most common isotopes:

1. Pt195 (33.83% of the total).
2. Pt194 (32.97% of the total).
3. Pt196 (25.24% of the total).
4. Pt198 (7.16% of the total).
5. Pt192 (0.78% of total).
6. Pt190 (0.01% of total).

Read more about market shortages

So, as you already know, the market is now short of 19,000 ounces of platinum, which is caused by increased activity by businesses and individuals investing in precious metals and industrial enterprises. All this is happening against the backdrop of optimism about the speedy recovery of economies.

Thus, the Anglo American Platinum mining and processing enterprise began operating in December last year, and was actively operating throughout the first quarter of 2021. With their colleagues from South Africa, things are not so simple. While the pandemic raged, they remained idle in 2021. The mining industry has now begun active work. At Norilsk Nickel, the decline in production levels was associated with technical problems. The mine was flooded, and the shortage had to be compensated by refining existing reserves at a new factory. So far, the problem of the Russian enterprise has not been completely resolved, and the market is awaiting news.

Secondary supply increased by 18% over the year, which was due to the increased cost of recycling jewelry products.

In the first 3-4 months of 2021, platinum demand increased by an additional 405 ounces, representing an increase of 26%/year. If we talk about actual figures, we are talking about 1.9 million ounces. In addition to indirect economic reasons, this was influenced by increased consumption of material by industrial companies and the recovery of the jewelry market. You also need to take into account such an important nuance as deferred demand. As soon as national governments lifted quarantine measures, many buyers returned to the market. In parallel, the authorities stimulated the economy from internal reserves. Investment increased across the globe and aggregate demand for platinum created increased by a further 69 thousand ounces. This was most influenced by those investors who invested in various exchange-traded products in the EU countries and on the North American continent.

Place of Birth

Platinum mining in the world is concentrated in South Africa (80% of global production), Russia and Canada. Latin American platinum reached Europe only in 1735. The metal was also discovered in Brazil in the mineral syenite, where it is found together with gold.

Where is platinum mined? Among the largest deposits:

• Ural alluvial deposits discovered in the Nizhny Tagil region;
• Lapland mines (Finland), where the metal is bound together with diamonds;
• Deposits in the Canadian provinces of Ontario and British Columbia, as well as in large areas adjacent to the Yukon River Valley.

Platinum deposits in Russia, in addition to the Urals, are also located beyond the Arctic Circle, in the Norilsk region. Formally, Germany (Rhine Valley), Indonesia (Borneo Island), Spain, Ireland, USA, Australia and New Zealand are also considered platinum mining countries. The volume of production there is small and does not yet have global economic significance.

Among the exotic methods of production, it is worth mentioning meteorite iron, which often contains this metal.

What is predicted for platinum supply in 2021?

Supply is expected to increase further this year. This is due to the fact that one of the largest mining plants in the world, Anglo American Platinum, is operating at full capacity, access to the mines is not limited by lockdowns, and the company will strive to cover at least part of the demand for platinum caused by the shortage.

It is expected that the total supply of metal will increase by 16% annually. A significant part of the refined platinum will be supplied from South Africa. If we compare the situation with what happened at the beginning of 2021, the situation will improve significantly.

The only exception will be the largest Russian supplier. Unfortunately, there is no confidence that the consequences of flooding at the mine will be eliminated quickly. Most likely, the next two quarters the level of production will be lower than previously predicted.

For refined platinum, secondary supply growth is projected to be no more than 3%, which will amount to 64,000 ounces. The reason for this was the protracted problems with autocatalysts and the procurement of affordable products.

Chemical properties

The first chemical studies were carried out back in 1741 by the British scientist Charles Wood. It was he who first called this element a metal (the eighth among those known at that time), and described some of the characteristics of platinum.

Reactivity

The history of platinum includes a test of "nobility". The metal passed it thanks to the research of British chemists William Wollaston and Smithson Tennant. At the beginning of the 19th century, they tried to dissolve purified platinum in a mixture of nitric and hydrochloric acids. After the metal was separated from the rest of the solution, palladium, rhodium, osmium, iridium, and later ruthenium were found in the waste. It is characteristic that mining today is carried out using a similar technology: samples containing the element are dissolved in an acidic environment, separated from the rest of the solution and by-products, and melted at very high temperatures to obtain pure metal.

Projected platinum demand during 2021

So, over the course of the year, demand for platinum will add another 5%. In terms of metal weight, this is an additional 378 thousand ounces. As has already been emphasized, the increase in market demand is due to both the restoration of the work of industrial enterprises, including the automobile industry, and the needs of jewelers. Although investment demand is lower than previously, this does not mean that investors will sharply reduce purchases in 2021. If the forecasts for their interest in the precious metal are confirmed, we will get 726 thousand ounces versus 1.4 million ounces in 2021. Is this change logical? Quite, considering that reserves of the valuable metal are gradually being restored.

However, if you look at what is predicted on the market for exchange-traded products (250 thousand ounces) and for physical platinum assets (436 thousand ounces for coins and bars), then the demand for platinum will definitely not fall.

People begin to invest in this metal not only in the long term, but also in the short and medium term. The demand for this metal is growing against the backdrop of the fact that it is increasingly used in autocatalysts, including replacing palladium. Also, assessing the overall growth prospects of the hydrogen economy, experts believe that the demand for platinum (and therefore the price) will increase.

The auto industry alone must buy 24% more metal this year for production needs. In fact, this will mean an increase in purchases by 557 thousand ounces compared to last year’s figures. This is due to the fact that passenger cars will be produced 16% more than a year earlier. For freight transport, the increase will be 3%. These figures could be significantly higher, but growth is still limited by the shortage of microchips produced. At the same time, the automotive industry largely determines the global demand for platinum, because China and the EU have introduced more stringent environmental standards. Accordingly, now more autocatalysts will be converted to platinum. It will replace palladium both in the aforementioned China and the European Union, as well as at enterprises in the USA, Mexico and other North American countries.

Other industrial sectors will also increase their consumption of the metal by approximately 486 thousand ounces, representing an additional 25%. Here, in addition to the general improvement in the global economic situation, an increase in demand for high-quality glass by 70% will play a role. This is due to the mass production of new, more modern liquid crystal panels. Also, the demand for platinum as a component has increased in construction and energy.

The next, and no less important point is the purchases of jewelry companies for the production of products. They are expected to rise by 9% (an additional 158 thousand ounces). Most likely, the main consumers will be Europe, North America and India. All of the above will lead to a metal shortage in 2021. The expected figure is 158 thousand ounces.

Against the backdrop of deficits, general economic growth and other events, investment demand will increase and last for a long time.

Speaking about the growth of the global economy, it is worth clarifying that by March it showed impressive rates. There were so many more production orders at enterprises that they rose to the highs of the decade. In addition to the vaccination of the population, this was influenced by government support in the United States. The authorities have allocated 2 trillion. dollars. This boosted industry, and investors again became interested in investing in commodities and precious metals. Against the backdrop of overall growth, many experts drew attention to the fact that platinum regularly shows good results. Just look at the charts of the last few years, which show two important facts: a persistent shortage, and a subsequent increase in demand for platinum from industry and investors.

If we talk about prices, the cost of platinum for the first quarter of 2021 was $1,162/oz. This is a 23% quarterly increase and 29% annual growth. If you look up the quarterly numbers over the past few years, results like these haven't been seen since the beginning of 2015. Three quarters of 2021 and the first of 2021 show that the three-year deficit continues. But if earlier it was 60 thousand ounces, now it has reached a much more impressive 158 thousand. At the same time, analysts believe that demand for platinum does not reflect real value, given the decline in supply and growing market demand.

As previously emphasized, the transition of gasoline catalysts that previously used palladium to platinum will cause further shortages. Environmental regulations will also continue to worsen. Accordingly, automobile concerns will be forced to buy more platinum.

What will happen to investor demand? There is an assumption that he will be able to exceed the current expectations of analysts, and the situation will continue even in 2022. Accordingly, the situation with the deficit will not change. It will only get worse every year.

History of discovery and origin of the name of the metal

The first mention of this substance dates back to 1557, when the Italian physician and humanist Julius Caesar Scaliger described the metal he found in Central America. It was not possible to melt this metal using the means and methods that existed at that time and were available to the Spanish conquistadors. Therefore, Scaliger named the new chemical substance platinum, which can be translated as “little silver” or even “little silver.”

Silver: origin and unique properties, mining technologies, application today

This name reflected both the color of the metal (silver-white) and its practical uselessness to people of that era. Therefore, at first, ancient metallurgists in Egypt and America used the metal to make jewelry and decorative items, mixing it with more easily melting gold. This may be why the metal was called white gold for quite a long time. The analogies were obvious - it, like gold, proved to be extremely resistant to tarnishing and corrosion. On the other hand, the element is very plastic and pliable: it can easily be deformed, pulled into a wire, etc. Finally, platinum is a full-fledged noble metal, since it does not oxidize and is not affected by ordinary acids.

Which investment instrument to choose?

Below is a comparison table of tools.

When choosing, you need to be guided primarily by your experience and financial literacy. If you don’t understand anything about the stock market, compulsory medical insurance is your choice. If you are familiar with fundamental analysis, you can buy Shares. A platinum ETF is suitable for diversifying investments.

Technical analysis of platinum versus US dollar

Let's start our technical analysis of the XPTUSD chart by looking at the monthly timeframe.

An ambiguous situation is emerging. On the one hand, the platinum price chart shows the possible emergence of a bullish trend. This is evidenced by the rapid upward movement of the price of XPTUSD quotes, accompanied by the updating of local extremes. On the other hand, along with an upward surge comes a decrease in trading activity, and this is a manifestation of weakness on the part of the buyer.

The current uncertainty will largely be resolved in the coming months, when it becomes clear whether platinum will be able to overcome the resistance level around 1200 USD and continue its upward movement or will push away from it, confirming the forecast for the development of a flat.

XPTUSD rate analysis for 3 months

To make a realistic forecast for XPT to USD for the next three months, we will analyze the weekly timeframe.

For clarity, let's look at the MACD. During the formation of the current peak, the moving average of the indicator crossed the signal curve from top to bottom and rushed to the zero mark (blue oval). Together with the chart moving into the negative zone, this signal confirms that the price of platinum will decrease in the future.

Therefore, the most likely forecast is bearish. Taking into account the cyclical nature of the trend, the projected price of platinum will decrease over the next 2-3 months. The expected fall is limited by the strong psychological level of 1000 USD.

If the bulls fail to defend the $1,000 price, there will be an opportunity to open short trades with a small stop. This will increase the pressure on the buyer. The next likely target will be the support level around $561.

What will the platinum rate be in 2021?

We will conduct a technical analysis of the daily chart of platinum against the US dollar and make a detailed forecast for the entire 2021.

Having studied price history and changes in the width of Bollinger Bands, in the chart above I have depicted projections for each month of the current year in accordance with the most likely scenario for market movement.

Until mid-autumn, the expected trading range for platinum will be between 1000–1200 USD. A short-term correction will most likely end at $1000, but for this to happen, the price must first break through the blue uptrend line. Whether sellers will be able to do this or not is an open question.

The behavior of the XPTUSD pair in the summer will show how strong the bearish potential of platinum is. If a breakout does not occur, then the entire corrective formation risks turning into a volatile sideways trend.

One way or another, in October - November platinum trading is expected to be at levels above 1200 USD, so the spread of boundaries in the projections is very wide. The table below provides estimated price ranges for each month of 2021.

Technical analysis on XPTUSD was provided by Mikhail Khaipov.

Buying valuable platinum coins

As an investment in platinum, you can consider purchasing valuable platinum coins. This is also one of the ways to physically invest money in this metal. The advantages here are approximately the same, only there is no VAT when purchasing a valuable coin.

The disadvantages are similar to the bullion - in addition, judging by the websites of banks at the moment (April 2021), platinum investment coins are not offered for sale. Those. You cannot buy them in branches.

We found only one option for purchasing a platinum coin - a platinum coin from Australia “Year of the Ox”

You can, of course, buy similar foreign coins on various sites, but this raises questions about the liquidity and authenticity of the coins. We do not recommend purchasing physical platinum from places other than banks.