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Gold prices have soared more than 20% in 2020, and they hit a new record high earlier this year. Silver and palladium are surging, too. But platinum prices are down almost 15% year-to-date.
Now experts are saying platinum may soon catch up with its flashier rivals.
Investors often flock to gold and other metals in times of financial uncertainty. Most precious metals have benefited from the volatility that has resulted from the Covid-19 pandemic, a global recession, and concerns that Washington may not come to an agreement on more economic stimulus.
So the bet is that metals will hold up better than the dollar and other major paper currencies, which tend to lose value when the Federal Reserve and other global central banks are keeping rates low. It’s a reason why bitcoin has done well this year, too. And it should be good news for platinum bulls.
So why has platinum lagged behind? One key reason is that it has more of an industrial use than other metals. It’s not just a hedge against the dollar and something used in jewelry. Platinum is a key component of catalytic converters in cars, which are used to reduce exhaust emissions.
The slump in auto sales worldwide, coupled with the rise of Tesla and other electric vehicles (which don’t need catalytic converters), has hurt platinum demand.
The case for a platinum rebound
But some commodities experts think that platinum might finally be ready to make a sustained comeback. After bottoming out at just under $600 an ounce in late March, prices have rebounded to about $840.
Fed Chairman Jerome Powell has strongly hinted that the central bank is likely to keep interest rates at zero for several more years. That should depress the value of the dollar.
“The Fed has pumped more money into the markets. There is potential for more inflation as Powell talks about uncertainty and more stimulus,” said Ed Moy, chief strategist at gold seller Valaurum and a former director of the US Mint. “So there will be point where investors flock more to alternative assets like platinum.”
That could boost all metals, but platinum has much more room to run to catch up with gold, which is currently hovering around $1,850 an ounce. Will Rhind, CEO of GraniteShares, noted that platinum prices have historically traded at a premium to gold.
Moy added that platinum currently is extremely “underpriced” compared with gold and that in a normal economy, platinum and gold prices should be much closer to parity.
Platinum, along with other metals, may also get a boost after the election. The president (regardless of whether it’s Donald Trump in a second term or Joe Biden) will need to quickly work with Congress on more economic stimulus in 2021.
More stimulus and auto rebound could boost prices
That could be a combination of more relief for consumers and businesses struggling due to the pandemic as well as a long-awaited package to boost infrastructure spending.
“It doesn’t matter who wins in November. There could be a huge amount of stimulus — trillions of dollars spent,” said Steven Dunn, head of ETFs at Aberdeen Standard Investments, which manages the Aberdeen Standard Physical Platinum Shares ETF.
“That could make this an interesting story for platinum and all precious metals,” Dunn added.
There also is a global supply deficit for platinum right now.
This could help lift prices too — especially if there is a rebound in auto sales for traditional gas guzzlers and diesel vehicles in China and Europe. After all, traditional cars are still a lot cheaper than electric, as Tesla CEO Elon Musk so often points out.
“Platinum should make up some ground. There was a shortage before Covid-19. The pandemic has only made it worse,” said Everett Millman, precious metals specialist with Gainesville Coins. “Prices are still about 50% below the average of the past decade, but industrial use should put a floor under platinum.”
Along those lines, demand for platinum could increase as manufacturers realize that it’s a much cheaper alternative to palladium, which has many similar industrial uses and costs more than $2,200 an ounce. “More manufacturers could switch to platinum,” Dunn said.
So just as platinum credit cards offer more rewards than gold ones and platinum records have higher sales than gold albums, platinum prices may soon regain their luster and outshine gold as well.