CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Tight supply and palladium substitution fuel platinum rally

By Piero Cingari

16:31, 9 March 2022

Platinum bars in a 3D rendering
Platinum bars in a 3D rendering – Photo: Shutterstock

Platinum prices have risen since the onset of the Russian-Ukrainian war owing to worries about supply and export bottlenecks from Russia, which accounts for about 10% of global production.

Platinum has also benefited from the so-called demand substitution effect, which happens when the price of palladium rises, prompting buyers to seek out cheaper alternatives.

Despite Russia accounting for just 10% of global platinum production, the physical market may remain tight in 2022 owing to low levels of inventories outside Russia and global supply-demand mismatches.

In the coming days, a technical golden cross with the 50-day moving average nearing the 200-day moving average might arise, potentially adding to the platinum's momentum.

Russian disruptions and palladium’s boom tightened the platinum market

Market worries of curbs on Russian shipments, as well as palladium substitution effects, have aided platinum's climb in recent weeks.

Russia is a major supplier of metals, particularly platinum group metals (PGMs) such as platinum and palladium. Russia produces around 2,900 thousand ounces (koz) of palladium (40% of world supply) and 661/koz of platinum (10% of world supply). Furthermore, Russia supplies more than 20% of global battery grade nickel output and 6% of global aluminium production.

According to a recent report by the World Platinum Investment Council (WPIC), while Russian platinum supply accounts for only 10% of global supply, with South Africa taking the lion’s share of 60%, higher Chinese imports created further tightness in the platinum market, implying higher lease rates and stock drawdowns from NYMEX to alleviate shortages.

“Platinum imports into China in 2021 were higher than its identified demand and enough to absorb all of the annual global surplus”, Paul Wilson, CEO of the World Platinum Investment Council said. 

Moreover, palladium stocks outside of Russia are insufficient to fulfil world demand, hence further substitution effect of palladium for platinum in catalytic converters seems likely, WPIC added. 

Gold

1,948.36 Price
-1.480% 1D Chg, %
Long position overnight fee -0.0185%
Short position overnight fee 0.0103%
Overnight fee time 21:00 (UTC)
Spread 0.30

Silver

23.64 Price
-1.100% 1D Chg, %
Long position overnight fee -0.0185%
Short position overnight fee 0.0103%
Overnight fee time 21:00 (UTC)
Spread 0.032

Natural Gas

2.21 Price
+1.050% 1D Chg, %
Long position overnight fee -0.1406%
Short position overnight fee 0.1187%
Overnight fee time 21:00 (UTC)
Spread 0.005

Oil - Brent

76.25 Price
+2.560% 1D Chg, %
Long position overnight fee -0.0094%
Short position overnight fee -0.0125%
Overnight fee time 21:00 (UTC)
Spread 0.04

Another likely long-term driver for the rise in platinum is the increase in hydrogen production and consumption as Europe seeks to lessen its dependency on Russian natural gas. This would encourage increasing commercial use of fuel cell electric cars, which are expected to be a substantial source of platinum demand in the future.

If the Russian mining supply is excluded, the supply-demand balance for platinum in 2022 turns in a slight deficit, as the chart below shows. 

Goldman Sachs currently predict platinum prices to hit $1,200/toz in 2022, which means a 10% upside from current levels. 

What is your sentiment on Platinum?

1015.25
Bullish
or
Bearish
Vote to see Traders sentiment!

Platinum supply-demand balance expected in 2022 

a chart showing platinum supply and demand balance for 2022Platinum Supply-demand Balance (koz) in 2022 – Credit: Capital.com / Source: WPIC

A golden cross start to dawn on platinum

Looking at the daily platinum chart, we can see the 50-day moving average approaching the 200-day moving average from below, and a cross would give the formation of a golden-cross.

Platinum prices had risen by about 15% since the outbreak of the war in Ukraine, hitting the level of $1,180 per troy ounce (toz), before pulling back from overbought RSI levels to $1080/toz on March 9. Platinum is now trading at levels similar to the peak set in mid-November.

The Fibonacci retracement analysis, from the lows of December 2021 to the highs of November 2021, could suggest the hypothesis of an extension to $1,225/toz (161.8% level) as next target.

Platinum's key support levels are $1,056/toz (78.6% Fibonacci), $1,022 (61.8%), and $998/toz (50%). A fall below the psychological level of $1,000/toz might lead to a reversal of the uptrend.

a chart showing technical analysis on palladiumPalladium 1-day chart, technical analysis – Credit: Capital.com / Source: Tradingview

Markets in this article

Aluminum
Aluminium Spot
2272.25 USD
-4 -0.180%
Aluminum
Aluminium Spot
2272.25 USD
-4 -0.180%
Aluminum
Aluminium Spot
2272.25 USD
-4 -0.180%
Nickel
Nickel Spot
21068.57 USD
-382.79 -1.790%
Nickel
Nickel Spot
21068.57 USD
-382.79 -1.790%

Related topics

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 535.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading