While platinum prices and exchange traded funds are dipping back to where they started at the beginning of the year, supply disruptions and higher automobile demand may support the platinum market. However, short-term global risk may constrain the markets in the near-term.
ETFS Physical Platinum Shares ETF (NYSEArca: PPLT) is up 1.6% year-to-date and the ETFS Physical Palladium Shares ETF (NYSEArca: PALL) is down 6.8% year-to-date.
Spot platinum was at about $1,433 per ounce Monday and spot palladium was at $614 per ounce.
According to Barclays Plc, global platinum will diminish 4% to 6.14 million ounces this year, the first drop in mining supply in four years, due to labor strikes and safety concerns in South Africa, the largest producer of the metal, reports Nicholas Larkin for Bloomberg.
Analysts predict that platinum will average $1,750 an ounce in the fourth quarter as a result of the diminished supply and record car sales, the largest source of demand for platinum. [The Outlook for Palladium, Platinum ETFs]
“Platinum is very, very cheap at the moment,” Thorsten Proettel, an analyst at Landesbank Baden-Wuerttemberg, said in the article. “It’s more the supply side which could help the platinum price accelerate because supply is very tight.”
Currently, it costs about $1,437 to extract an ounce of platinum, Proettel noted. With current platinum prices, it is not profitable for miners to continue expanding.
“The absence of supply side production constraints, coupled with the generalised rise in risk aversion may constrain upside price potential in the near-term,” according to a ETF Securities precious metals report.