Platinum prices extend six-year high and likely to keep going

  • Prices surged above $1,281.40 an ounce
  • Burgeoning hydrogen economy pushing platinum demand upwards
  • Platinum still undervalued vs gold and palladium

Platinum prices touched a six-year high last week on Thursday as investor exposure continues to grow amidst global changes in environmental emission policies fronted by the US upon which platinum is a crucial component.

On Thursday, platinum traded as high as US$1,281.40 an ounce, which is the highest level since January 2015. The bullish prices extended on Monday, where the on-demand metal rose to US$1,291.72 an ounce, as at 1 pm CAT.

Despite two years of consecutive global deficits, with a third deficit projected for 2021 according to the World Platinum Investment Council (WPIC), platinum’s status as being more cost-effective emissions under the tightening regulations compared to its industrial substitute metal palladium should continue to drive more investor exposure.

A favourable, outlook for platinum is good news for Zimbabwe which has the world’s second-largest reserves of platinum, behind neighboring South Africa. The country’s primary platinum group metals (PGM) producers are Zimplats, Unki PGM Mine and Mimosa Mine.

On the environmental policy front, platinum has grown in importance in line with the burgeoning hydrogen economy. Green hydrogen has been thrust into center-stage in 2020, as more than 70 countries, plus the EU, pledged to achieve carbon neutrality by 2050.

Green hydrogen, produced by the electrolysis of water using renewable electricity as the power source, is key to decarbonisation and platinum’s role in the process is crucial.

It is used in fuel cells and in the electrolysis of water using renewable energy to produce green hydrogen, where it is used in conjunction with iridium as a catalyst during electrolysis. 

Also driving global demand for platinum is China’s renewed appetite for platinum jewellery. The global platinum jewellery market saw a dramatic 32% rebound in the second half of 2020, after COVID-19 related disruptions experienced in the first half.

According to WPIC January 2021 research note, “A rising platinum price, that benefits manufacturer and retailer margins, with a continued wide discount to gold, represents a highly conducive environment to drive continued platinum jewellery demand growth in 2021.”

On another note, platinum’s market shortage has also triggered high demand. There have been supply constraints due to the repair of the Anglo American Platinum Converter Plant (ACP) in 2020, COVID-19 supply logistical bottlenecks as well as the strong demand emanating from China as manufacturers increased stock levels.

However, platinum is still undervalued versus its precious peer gold, and palladium. Palladium prices are currently trading at a high of $2415.50 an ounce whilst gold is averaging $1824.27 an ounce.

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