NEW YORK (Scrap Register): Investors may be starting to warm up to platinum, after shunning it while sister metal palladium rose sharply during the first two months of the year, said Maxwell Gold, director of investment strategy with Aberdeen Standard Investments.
Declining sales of diesel-powered vehicles, which require platinum for catalysts, have hurt the metal. “However, recent buying driven by traders as well as exchange-traded funds has seen a dramatic turnaround for platinum so far this year,” Gold added.
“This turning point is likely driven by the severe price discount of platinum to palladium, which is at a record low of approximately 45%. The previous trough in the platinum-palladium ratio in December 2000 was followed by a multi-year rally for platinum,” Gold continued.
Gold said that the investor sentiment appears to be that “platinum is simply too cheap to resist,” resulting in year-to-date net inflows of 12.9 metric tons into platinum ETFs, the strongest two-month period since May and June of 2013.
Further, total platinum ETF holdings globally stood at 85.1 metric tons as of February, only 6% below the all-time high of 90.25 from August 2015.
“Current platinum prices remain slightly below the base case scenario of $875-$925/ounce, but given the cheap relative valuations and diverse usages of platinum, the outlook for the metal is looking stronger,” Gold added.
“A sustained increase in investment demand may be the spark platinum has needed to help further close the gap to its precious metal peers,” Gold noted.