Platinum price forecast: Will the rebound continue?

We examine the latest outlook for the platinum market after a recent rally.

By Capital.com Research Team18:57 (UTC), 2 December 2022 Updated

Platinum ore on dark background — Platinum has recovered from the multi-year low it hit in early September – Photo: Shutterstock

The platinum market has rallied by 23% since late September, trading above $1,000 for the first time since and outperforming the other precious metals.

What has been driving the platinum market higher, even as the larger precious metal markets like gold struggle to break out?

How has geopolitical instability affected the supply and demand balance, and what do the latest platinum price predictions indicate for investors? Let’s look at what has been moving the market and some analyst forecasts for the direction of prices in the future.

Platinum price volatility reflects geopolitical dynamics

Platinum live chart

As well as being an investment commodity used as a portfolio hedge, platinum is widely used for jewellery and in the industrial and automotive sectors, where it is a key component in the catalytic converters used to create cleaner vehicle emissions.

The platinum price spiked from $962 per ounce at the start of the year to $1,166/oz on 9 March, on concerns about supply out of Russia, the world’s second largest producer of the metal after South Africa.

The price then retreated as supply was not affected by disruptions, and demand from the world’s largest consumer, China, declined during extended Covid-19 lockdowns.

Russia accounts for 11% of global platinum mining output, producing 19,000kg of the total 180,000kg, making it the world’s second-largest producer, according to data compiled by Dutch bank ABN Amro. Russia’s Nornickel is also the world’s largest producer of palladium, accounting for more than 40% of the global supply.

Over the long term, demand could shift away from Russian palladium due to both record high prices and ethical concerns, prompting automotive manufacturers to switch to using platinum as a substitute.

The London Platinum and Palladium Market (LPPM) suspended newly refined Russian platinum from trading on the exchange in April, lifting the price from $924 back over $1,000 per ounce. But the metal dropped to trade around the $840 level in early July – a low not seen since late 2020 – then reversed course, rising for several consecutive weeks as US Federal Reserve (Fed) chair Jerome Powell indicated a potential slowing of the pace of interest rate hikes amid contraction in the US economy. Cheaper dollars are an encouraging factor for foreign investors who want to buy the dollar-denominated commodity.

The market made gains to $967 in mid-August, before falling back to $843 on 2 September. The price has been trending higher since the end of September, and spiked from $935 on 3 November to $1,070 on 11 November.

The platinum market retreated to $984 on 21 November, but then moved back above $1,000 on 28 November and was trading at $1,054 on 2 December.

On 22 November, the World Platinum Investment Council (WPIC) issued its 2023 forecast, predicting that the market will shift to a deficit after two years of substantial surpluses as global demand is expected to grow by 19% compared with a 2% increase in supply.

Automotive demand is expected to grow by 12% in 2022 and 11% in 2023. Demand jumped by 25% year on year during the third quarter, recovering from a sharp drop in the third quarter of 2021 and driven by a 27% increase in production of light-duty vehicles as supply-chain constraints eased.

And despite a challenging economic outlook, industrial demand in 2023 is expected to rise by 10%, well above the 10-year average.

“Supply constraints, combined with increased bar and coin demand, have seen the market surplus forecast for 2022 revised downwards by 17% (-170 koz) to 804 koz. The profound swing in market balances between the 2022 surplus and the 2023 deficit is forecast to be more than 1.1 Moz,” the report stated.

Operational challenges reduced refined platinum production declined by 171,000 ounces, or 11%, year on year during the third quarter. Maintenance and power supply challenges in South Africa, which produces over 70% of global mined supply, reduced output. Disruptions are expected to continue in 2023, with supply forecast to rise by only 89,000 ounces, or 2%, to 5.7mn ounces.

“Additionally, exceptionally strong import volumes into China continued throughout the third quarter, contributing to ongoing physical market tightness despite the global surplus. Similar to previous quarters this year, these imports were significantly above identified demand in China and were met largely by sizeable flows from platinum ETFs and exchange stocks. Year to date, these excess imports into China, which are not captured in published supply and demand data, are already 1.2 Moz – far in excess of the forecast 2022 surplus,” the report added.

Interest in investing in platinum is expected to climb.

“Next year, platinum bar and coin demand is forecast to jump by 49% (+167 koz) to 507 koz, a three-year high, as manufacturers in North America and Europe allocate more capacity to platinum on weaker gold and silver demand, and net disinvestment in Japan swings to net investment. Meanwhile, outflows from exchange warehouses (-20 koz) and liquidations of ETF holdings (-275 koz) are expected to slow, resulting in net investment of 212 koz in 2023,” WPIC stated.

A strengthening in the value of the Japanese yen against the US dollar (USD/JPY) since October has prompted platinum buyers in Japan to sell the metal to take profits.

“Despite the significant run in the price, investment in global exchange traded funds (ETFs) has been net negative, mirroring the trend across gold and silver ETFs. In Japan, investors tend to be strongly influenced by the platinum price. The ¥4,000/g level acts as a psychological point above which investors tend to take profits, liquidating ETF positions,” according to analysis by Heraeus Precious Metals.

“This pattern has repeated year-to-date as selling occurred in June, and again in October when the price breached this key level. The platinum price reached a peak of ¥4,688/g this month and, month-to-date, net outflows from Japanese funds have totalled 10,700 oz, equal to a 10% reduction in total holdings. In comparison, North American funds, although net negative in terms of holdings year-to-date, added 22 koz of platinum in October as the price in dollar terms neared a seven-month high,” Heraeus added.

What does that mean for the platinum price forecast? Will the market be able to sustain the gains above the $1,000 per ounce level heading into 2023, or will the price pull back?

Platinum price forecast: How will the precious metal trade heading into 2023?

Analysts at Canadian bank TD Securities are bearish on the short-term platinum price forecast, recommending going short on the metal heading into 2023.

“We short active platinum, anticipating that buying exhaustion is imminent. The set-up for a bull trap has been forming in precious metals markets, as a slew of narratives ranging from an imminent reopening in China to peak central bank hawkishness catalysed a massive short covering rally, exacerbated by CTA buying activity,” the analysts stated in a client note.

“Buying exhaustion appears most notable in platinum markets, with only minimal follow-through buying activity expected even for the bull case in prices. Instead, platinum prices are now vulnerable to a tactical sell-off as substantial CTA selling activity is expected as prices are weighed down by a sluggish Chinese recovery and as the backlog that feeds auto sales begins to subside with global economies headed towards recession. A recovery in South African refined metal output should also support our trade, associated with a build-up in work-in-progress inventories following the completion of a major smelter rebuild over the next few months.”

According to the bank’s platinum price forecast for 2023, the platinum price could fall to $875 in the first quarter but then trend higher to $1,100 by the end of the fourth quarter. For the longer term, the price could continue to rise in 2024, reaching $1,225 by the end of the year. The bank’s platinum price forecast for 2025 indicates the price could then average $1,175 per ounce.

Analysts at Australian bank ANZ expect that “easing semi-conductor supply tightness could revive auto-sector demand for PGMs. That said, doubts around the economic outlook could cap the upside.”

The bank’s platinum price forecast predicts that the market could end the year at $1,000 per ounce and trend higher from $1,020 at the end of the first quarter of 2023 to $1,250 by the end of the first quarter of 2024.

Platinum price forecast	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q4 2023	Q1 2024	Q2 2024	Q3 2024	Q4 2024	2025
ANZ	1,000	1,020	1,150	1,200	1,200	1,250	-	-	-	-
TD Securities	-	875	950	1,1025	1,100	1,125	1,150	1,200	1,225	1,175

The platinum long-term forecast from algorithm-based services anticipates the market trending higher over the coming years. At the time of writing, Wallet Investor predicted that the price could rise from $1,035.954 at the start of 2023 to $1,035.954 by the end of the year, and then reach $1,105.962 by the end of 2024, $1,144.732 by the end of 2025 and $1,203.539 in five years’ time.

CoinPriceForecast was bullish in its platinum price forecast for 2030, projecting that the price could soar to $2,912 by the end of the decade, from $1,393 at the end of 2023 and $1,819 by the end of 2025.

If you are looking for a platinum price forecast to inform your trading, keep in mind that market volatility makes it difficult for analysts and forecasters to make accurate long-term predictions. We recommend that you always do your own research before making any investment decision.

FAQs

Is platinum a good investment?

Investors use precious metals like platinum to hedge their portfolios, but whether platinum is a suitable investment for you will depend on your risk tolerance, portfolio strategy and how much you intend to invest.

Will platinum go up or down?

The direction of the platinum price will depend on supply and demand for the metal, influenced by global economic activity and geopolitical events.

Is platinum a better investment than gold and/or silver?

Only you can decide which, if any, precious metal is a better investment for you. Platinum prices can be more volatile than gold and silver, which can generate higher returns but also increases the risk of larger losses. Keep in mind that liquidity is lower on the platinum market, which can affect your ability to enter and exit trades.

Should I invest in platinum?

Whether you should invest in platinum is a personal decision only you can make based on your personal circumstances. You should do your own research to make an informed decision. Remember to never invest money you cannot afford to lose.