Platinum’s $400 Surge: What Investors Should Know

Jeffrey Christian: Well, we sort of see it as shorter-term investment buying, although some of it is, as you were saying, this opportunistic, “let’s build inventories while the price is down,” because, yes, it could go higher, and because the price has been low for so long, there’s no technical resistance between, say, $1,050 and $1,600.

Sean Brazney: You know, with a lot of things going on in the precious metals market, there’s one that stands out, and it stands out to me, because you and I have talked about it a few times over the last year or so, maybe the last two or three years, is platinum. Recently, in about one month’s time frame, platinum broke out and made almost a $400 per ounce move. I’m wondering what your thoughts are on this move. Why did we make this move and is this something we can continue?

Jeffrey Christian: I’ll be really honest. We have been somewhat perplexed by the upward move, because we’ve seen platinum trade in this range, as you said, $800 to $1,050, not just for a couple years, but really for like a decade, and we look at the fundamentals of the market, well-supplied, a lot of metal in inventories. Mine production is suffering in South Africa and Russia, to a lesser extent, but it’s there. Auto industry is moving away from using PGMs and catalysts, so fabrication demands down. We’ve sort of assumed that the price would pretty much stay in that range with occasional spikes up. Then we saw this spike and 40% increase in one month. It really began at the end of May, the beginning of June, and we can trace it to a report from the World Platinum Investment Council, which came out with a report in late May, said that there is a massive deficit in the platinum market, which we don’t see in terms of new supply relative to fabrication demand, but that there was very strong jewelry demand in China, and that they expected the auto industry to pick up both its production of automobiles that are gasoline powered, and therefore their use of platinum palladium and rhodium. After that report came out, we started seeing speculative buying. At first, it was on the 9X, but then it was more broadly, and we’ve seen it continue through the last six weeks. We’re a little bit surprised by it. Now, this week, there is a platinum conference in Shanghai. So, that’s adding to the market enthusiasm, but we sort of see it as shorter-term investment buying. Although some of it is, as you were saying, this opportunistic, “let’s build inventories while the price is down”, because yes, it could go higher, and because the price has been low for so long, there’s no technical resistance between, say, $1,050 and $1,600.