Platinum is not in trend. It's never been so cheap before

Platinum is not in trend. It's never been so cheap before

Platinum is trading at historical lows relative to gold, showing the worst performance among the precious metals. Let's figure out why the precious metal is losing its value so rapidly?

Description of metal

Platinum is a silvery-white precious metal first discovered by Spanish conquistadors in the mid-16th century. In Russia, platinum placers were discovered in 1819 in the Urals, which were so large that the country very quickly became a leader in the extraction of this metal. Initially in Russia the metal was called “white gold”.

Today, South Africa has a leading position in platinum production, producing about half of all annual metal production and on whose territory about 80% of all economically viable platinum deposits in the world are concentrated. Other major producing countries are Zimbabwe, USA, Russia, and China.

Initially, the precious metal gained its popularity in the jewelry industry, but the physical and catalytic properties of the metal became the basis for its widespread use in industry. The metal is used in the automotive industry, chemical industry, electronics, oil and gas industry, jewelry and other segments of the economy. Jewelry production creates only 30% of the total metal demand.

Just a few years ago, platinum was the most expensive on the precious metals 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.

Since the beginning of 2015, platinum has steadily held a lower position compared to gold. If the trend continues, at this rate platinum could soon be removed from the list of precious metals.

What's happening

The decline between 2011 and 2014 was associated with a decline in the market as a whole, when the decline in gold prices pulled down the prices of all other precious metals. But since 2015, an independent negative case has appeared in the history of the platinum market.

Due to its catalytic properties, platinum, along with another precious metal palladium, is used to produce catalysts for cars. Almost 40% of the total demand for metal comes from automakers.

The automotive industry's focus in 2015 was the Volkswagen scandal. An independent study conducted by specialists from the International Council on Clean Transport (ICCT) and designed to prove the environmental friendliness of diesel vehicles revealed exactly the opposite results. The amount of harmful substances in the exhaust of the tested cars was tens of times higher than the permissible standards.

The results were shocking, since previously, similar models passed all the necessary laboratory tests. After several more tests, Volkswagen management was forced to admit that the company installed special software on its cars that changed the operating mode of the engine in laboratory conditions in order to hide the real content of harmful substances.

The scandal led to a change in the position of politicians in Europe, which is the second largest market for platinum. The auto industry's priority has shifted to gasoline vehicles, and there are serious concerns about a significant decline in the share of diesel vehicles in the coming years. According to the Society of Motor Manufacturers and Traders, sales of diesel cars in 2017 fell by 17% and accounted for 42% of the market, against 47.7% a year earlier.

What is the relationship between diesel vehicles and platinum prices?

Platinum and palladium are used in both diesel and gasoline cars in the production of catalysts - special devices that reduce the amount of harmful substances in car exhaust. But the ratio of metals in catalytic elements is different.

On cars with a diesel engine, 70-80% is platinum, 18-28% is palladium, and the rest is rhodium. In gasoline vehicles, the volume of metals in the catalytic elements is approximately two times less, and the ratio of platinum, palladium and rhodium is 1:8:2, respectively.

The scandal surrounding diesel engines put significant pressure on platinum quotes and set a positive trend for palladium prices in the following years. The spread between metals has narrowed rapidly since the beginning of 2021. The Platinum/Palladium ratio, which was around 1.8x at the start of 2021, is now 0.9x.

Since the fourth quarter of 2021, palladium has been steadily trading at a premium to platinum, the rarest metal on earth and previously valued more than gold.

Another factor putting pressure on platinum prices since 2014 has been the decline in demand for the metal from the jewelry industry. According to Reuters, the level of demand in 2021 compared to 2013 was 20% lower. A similar trend is typical for other metals. The drop in demand was mainly observed from China.

Market prospects

At the beginning of 2021, prices for the metal were under pressure along with other commodities due to the risks of trade wars, causing platinum prices to return to lows again after the rebound in late 2021. However, if you look at the figures representing the ratio supply and demand in the real physical platinum market, the existing discount to gold appears excessive.

According to Reuters, the platinum market has experienced a deficit for the third year in a row. In 2021 it amounted to 50 million ounces. Agency analysts predict the continuation of a commensurate deficit at the end of 2018 due to a moderate decline in production in South Africa and growth in industrial demand.

The situation is stressful for platinum producers. Current price levels are very close to the cost of metal mining. According to Metal Focus analysts, the average production cost in South Africa in 2021 was $834 per ounce, so if the current price level is maintained, a compensating reaction from the supply side will inevitably follow.

However, South Africa is not the only country where a decline in production is predicted. A significant drop is expected in Canada (by 8%) and Russia (by 3%). Other regions are expected to see more modest declines.

However, the decline in production will be partially offset by an increase in platinum production from autocatalyst scrap, which is expected to grow in the coming years. However, the overall trend is negative.

In North America and Europe, analysts predict an increase in demand in the jewelry industry, but declines in China and Japan will offset the entire effect. Overall, a moderate decline is expected, the rate of which will be slightly lower than in 2021.

Increased demand from the automotive industry is expected in all regions except Europe and Japan. What is noteworthy is that, despite the scandal with diesel cars, during 2015-2017. Demand from the auto industry also showed positive dynamics, adding an average of 1.8%.

This may indicate that the negative effect on quotes on this side was more of a psychological nature and is associated more with expectations than with the actual dynamics of demand in this segment.

In addition, given the discount of platinum to palladium, a number of automakers may be thinking about expanding the use of platinum due to its low cost, which will provide additional support to demand.

The rest of industrial demand already showed good growth of 7% in 2021. This year it is expected to add another 9% due to the significant contribution of glass production.

All of these factors indicate that platinum's discount to gold will narrow over the next 12 months. Analysts are of the opinion that this will be a gradual process, since the risks from trade wars are now quite strong and against their background, market participants will be quite cautious in making decisions. In addition, moderate pressure on the metals market is exerted by the strengthening of the US dollar against the backdrop of expectations of an increase in Fed rates.

Galaktionov Igor BKS Broker

Educational program on platinum

Many investors and collectors want to learn more about platinum, a very rare precious metal that can be used to create interesting coins, tokens, and bars. Below we answer the most common questions regarding platinum.

Is it worth buying platinum?

Yes, if you want to protect your savings from inflation. In addition, it is important to buy platinum, because its value may rise in the coming years.

Is it possible to purchase physical platinum?

There are refined platinum products in the form of coins, tokens and bars. This is the most popular and convenient way to purchase precious metals. Their main quality is liquidity, that is, they can be easily sold.

Is it possible to buy pure platinum?

Absolutely pure platinum? Certainly! Many platinum coins, bars and tokens are minted from .9999 fine precious metal.

How to buy platinum?

Many people buy platinum in the form of coins, bars, and tokens, which can be found at dealers. is one of the leading dealers of coins and bars in Russia. On our website you can find platinum products.

Questions about selling platinum

Is it profitable to resell platinum?

Platinum is a liquid asset and one of the most sought-after precious metals in the world. Therefore, it is profitable to resell it. It's best to do this in .

Is it possible to give platinum to a pawnshop?

Yes, but why? Pawn shops are good if you are going to buy or sell old audio speakers or a guitar, but you can sell platinum profitably at the Golden Coin House.

Questions about the platinum rate

Why has the platinum rate dropped in 2021?

Not everything is so simple. At the beginning of 2021, platinum and other precious metals could be purchased at prices that, at first glance, seemed low, but in 2008 and mid-2021, quotes reached record highs. Platinum and other precious metals are now much more expensive than they were in the 1980s and 1990s. Now the rate of platinum has decreased relative to previous highs, so it is profitable to buy it, given the possibility of a rally in prices for other precious metals and an increase in demand for platinum.

Why is platinum so expensive?

This precious metal is very rare, hence the high cost ($971 per ounce as of October 2, 2021). The fact is that platinum is found less often in the bowels of the earth than gold. The source of the lion's share of demand for platinum is industry. Therefore, platinum is always in demand. Low supply compared to significant demand is the reason for the high price of platinum.

In what year was the platinum exchange rate highest?

In 2008, a record price for this precious metal was set. At that time, an ounce of platinum cost about $2,075.

Why has platinum fallen so much in price?

The rate of this precious metal rises and falls depending on various factors. Some of them are directly related to fluctuations in platinum demand. At the same time, the price of the precious metal may be affected by investor sentiment on Wall Street, the dollar index and the geopolitical situation. Sometimes prices fall as a result of correlations with other market events, but these events do not necessarily cause the corresponding changes.

How much does a gram of platinum cost?

A troy ounce contains 31.103 grams of the highest grade precious metal. Therefore, you can calculate the cost of a gram of platinum by dividing the current cost of an ounce by 31.1.

How much does 100 grams of platinum cost?

To find out, you need to divide the price of platinum per ounce by 31.1 and then multiply the resulting number by 100.

Is platinum cheaper than gold?

There were cases when platinum was worth more than gold, but now the situation is different. This can be explained by several reasons, namely the relatively higher demand for gold and the fact that for a long time investors have preferred to buy the yellow metal to hedge risks.

Questions about the value of platinum

How much is a platinum coin worth?

It all depends on the weight and fineness, the current price of platinum, the collector's value and the demand for a given coin. These factors explain the fact that some platinum coins can cost several thousand dollars.

How much does a platinum bar cost?

In this case, everything also depends on weight. Typically, platinum bars are minted in the following weight categories: 1.10 ounces or 1 kilogram (32.151 troy ounces).

How much does platinum scrap cost?

It all depends on the weight of this scrap. The weight (and fineness) will determine the value of the scrap, regardless of whether we are talking about a few particles of platinum dust or fragments of platinum broken off from an ingot.

Questions about investing in platinum

Is platinum an asset?

Yes, platinum is an excellent asset in demand from investors. Platinum is a profitable investment for collectors who buy coins from this precious metal.

How can you profitably invest in platinum?

Buy at a low price and sell during a rally. Platinum is also worth buying for those who plan to create a long-term reserve in order to protect against the effects of inflation and economic instability.

Is it better to buy platinum or gold?

It all depends on your investment strategy and the current price trend for platinum and other precious metals. They prefer to buy gold because everyone knows about it and it has an excellent reputation, and there is also demand from industry and the jewelry industry. However, platinum is a rarer metal than gold. Over the past few decades, platinum has become a very important raw material for several industries. Many investors diversify their portfolios into platinum, gold, silver and other assets to increase their chances of generating income regardless of market conditions.

Are platinum coins a good investment?

Quite. Platinum coins appreciate in value over the long term. Their prices may fluctuate in the short term, but if you are patient, you will be guaranteed passive income.

Is it profitable to buy platinum in 2021?

Some investors who bought platinum in 2021 were able to lock in profits, but the rest will have to wait. Those who bought platinum when the price appreciated significantly will need to wait long enough to receive a return. However, investing in precious metals should be carried out taking into account short- and long-term prospects. Some investors bought platinum ahead of the rally so they were able to take profits. Others have had incredible success by holding the precious metal for several years, but then selling it during a period of high inflation.

How much will platinum be worth in 2030?

It is impossible to predict what the price of this precious metal will be in the future. However, history can provide us with reasons to make investment decisions. Long-term trends have shown platinum and other precious metals rising in value over the years. Barring unexpected changes in demand for platinum or abnormal market conditions that would reduce precious metal prices, platinum is likely to appreciate in value.

Is platinum undervalued?

This is a question every precious metals investor asks himself over time. As for platinum, as already noted, this precious metal is in demand in many industries (and the volume of demand is increasing), so the rate is now really too low.

Will platinum become more expensive?

It is quite possible. It is important to remember that precious metals prices may fluctuate depending on various market factors. Even if the price of platinum declines tomorrow, it could return to today's value in a couple of days or even reach an all-time high within the next months or years. It is useless to try to predict the price of platinum, but to diversify your portfolio, it would be wise to stock up on your own platinum reserve.

Other Platinum Questions

Is platinum the rarest metal in the world?

Not really. The honor of the rarest and most expensive metal in the world belongs to rhodium. It is a silver-colored metal that is used in automotive and other industries.

What is platinum used for today?

It is commonly used in automotive catalytic converters, jewelry, medical equipment such as stents and catheters, some chemotherapy drugs, electronics, sensors, and the like.

Does platinum turn black?

Platinum will not turn black under normal conditions. However, this can occur when exposed to hydrogen gas, ammonia, or hydrochloric acid.

What's so special about platinum?

Platinum is a whitish metal, so it looks like silver. However, platinum does not tarnish or discolor as silver often does. In addition, platinum is a fairly dense precious metal and more durable than gold, but at the same time quite ductile. It is an excellent catalyst, which is why it is used for mechanisms where combustion occurs, such as fuel cells.

Why is platinum a very rare metal?

Platinum can be found in nature in relatively small quantities. It is mainly a by-product of the mining of other metals such as copper and nickel. All the platinum that has been mined in the history of mankind can be placed in the area of ​​a two-story small house. Increasing demand for platinum will make it an even rarer metal.

Where is platinum mined?

In several countries, namely Canada, USA, South Africa and Russia.

What is the shelf life of platinum wedding rings?

They have an unlimited shelf life. In addition, platinum does not change color under normal conditions, so the color of the ring will not change.

Why is platinum better than white gold?

Platinum is a natural metal, and gold gets its whitish hue by adding silver or palladium. In addition, platinum does not change color under normal conditions.

Is platinum shinier than white gold?

Platinum has a brighter luster than white gold. In addition, platinum does not fade over time, which cannot be said about gold.

Is platinum better than rhodium?

Platinum and rhodium have specific characteristics. Rhodium is the most expensive metal, while platinum is a rarer metal compared to other metals. However, platinum can be easily purchased in the form of a coin, token or bar.

Is platinum good for your health?

Platinum has antioxidant properties and is therefore used in various drugs, chemotherapy and other healthcare products.

How much platinum is left in the bowels of the earth?

According to Statista, 70 thousand metric tons of platinum remain in the bowels of the earth, with 95% of it located in South Africa.

Is platinum indestructible?

This precious metal can be melted down and turned into any product, but the material itself will remain intact.