Often overshadowed by gold and silver, platinum is an important part of the precious metals equation and the white metal has been a solid performer this year.
For example, the ETFS Physical Platinum Shares (NYSEArca: PPLT), the largest exchange traded fund listed in the U.S. backed by physical holdings of platinum, is up 7.6% year-to-date.
Although platinum is not as heavily traded as gold or silver, it is the third-most traded precious metal in the world and it is more scarce than its more popular rivals. Industry observers also believe that platinum companies have overextended operations during the commodities boom in prior years and have suffered from an oversupplied market as a result.
“Platinum, which climbed through the first two months of the year, has dropped this month amid prospects for higher U.S. interest rates and speculation that demand will slip for the metal used in auto pollution-control devices. ETF investors are looking beyond the short-term price weakness and focusing on the outlook for shortages that could propel prices over the longer term, according to Maxwell Gold at ETF Securities LLC,” reports Luzi Ann Javier for Bloomberg.
Another positive and important catalyst for platinum is that more of the metal is expected to be consumed this year compared to how much producers are able to mine, meaning demand will outpace supply.
“Consumption will outpace supply by 120,000 ounces this year, the fifth straight year of deficit, according to a March 9 forecast by the World Platinum Investment Council, created by the six leading producers of the metal to stimulate investor demand,” according to Bloomberg. “Total platinum supply is forecast by the World Platinum organization to drop 4 percent to 7.66 million ounces in 2017 as South Africa, which accounts for 70 percent of world output, closes unprofitable operations and resources from its other mines get depleted.”
South Africa is the world’s largest platinum producer and the second-largest producer of palladium, another platinum group metal.
Moreover, unlike gold, palladium, platinum and silver see much higher industrial demand. The precious metal enjoys heavy industrial demand that benefits from an expanding global economy.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.