The Aberdeen Standard Platinum Shares ETF (NYSEArca: PPLT) is higher by more than 10% over the past week and there are some signs indicating that platinum’s run may still have some room to grow.
PPLT seeks to reflect the performance of the price of physical platinum, less the expenses of the Trust’s operations and is designed for investors who want a cost-effective and convenient way to invest in platinum with minimal credit risk.
While the coronavirus pandemic weighed on riskier assets in the first quarter, things could have been worse for platinum.
“While the COVID-19 pandemic has had a major negative effect on the platinum market — including price, demand, and supply — the results for Q1 2020 show the net effect is less than feared, and the outlook for 2020 is better than expected,” said the World Platinum Investment Council (WPIC) in a note out Monday.
PPLT Can Continue Shining
Platinum is primarily used in catalytic converters in diesel-powered automobiles, but environmental concerns previously tamped down demand for the precious metal. As such, the price of platinum has fallen over the years amid weaker demand and excess supply, whereas gold and silver have found safe-haven support on an increasingly dovish Federal Reserve monetary policy outlook and palladium benefited from cars that run on gasoline.
“The platinum price fell together with that of most equities and metals during March; suffering falls of between 10% and 35%. Platinum demand in China reduced early in the quarter. However, a smelting process failure in South Africa, unrelated to the pandemic, as well as mine closures to reduce the spread of the virus significantly reduced quarterly platinum supply,” according to WPIC.
On the demand side, platinum will continue to enjoy robust industrial demand. Additionally, platinum jewelry is starting to enjoy a jump in demand as well, especially among the Millennial generation—younger generations in traditional gold-centric economies like India saw 2017 platinum jewelry sales jump 25%, according to Platinum Guild International.
“WPIC now forecasts that 2020 will have a surplus of 247 koz, which is only 128 koz higher than its previous forecast despite the impacts of COVID-19,” notes the trade group. “Demand in 2020 is expected to be 18% lower than in 2019 mainly on weak automotive and jewelry sales and lower investment demand. Supply is forecast to be down 13%, year-on-year, on the material impact of the smelting outage and pandemic related mine stoppages.”
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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.