Platinum has slid by a fifth this year to below $1,500 an ounce, and has even slipped below the gold price. Traditionally more expensive because it is rarer, it typically rebounds rapidly if it slips below the yellow metal. Yet the platinum/gold ratio (platinum’s price divided by gold’s), which is at a 26-year low, has continued to fall of late. For the first time ever, platinum has become $200 cheaper than gold. Could it get even cheaper?
On the supply side, prices have fallen below the costs of production, which usually means producers begin to curtail their output. That in turn eventually bolsters prices. But as most of the world’s supply comes from South Africa and the rand is also on the slide, the cost of production has fallen too. So “there is not much support there”, says Suki Cooper of investment bank Barclays Capital.
Johnson Matthey, the world’s leading platinum group metals refining and marketing group, is pencilling in a surplus this year and a smaller one next year, although it expects demand to keep rising. Demand from the car industry – platinum is used in catalytic converters – is at a three-year high and non-auto industrial demand has hit record levels. In the longer term, stricter global emissions standards will also underpin demand.
For now, however, it’s worth noting that “platinum is the most European-exposed commodity”, says Neil Fitzpatrick of investment bank Credit Suisse. “Recent noises [from the auto sector] have been negative.” Europe is sliding into recession and at risk of another banking crisis. China is also slowing. With global growth cooling and the fundamentals not looking especially tight, a significant near-term bounce seems unlikely.