Could Platinum be setting up to break out?

The platinum price is at the highest level in a year and could be set to break out.

Over the last four years, platinum has traded in a range between $900 and $1,100 an ounce. On Friday morning, the metal was just a tick above that $1,100 resistance level.

Platinum is more than twenty times rarer than gold. All the platinum ever mined could fit into a room measuring 25 feet by 25 feet.

Due to its chemical stability, high melting point, corrosion resistance, and catalytic properties, platinum is used in a wide range of industrial, medical, and commercial applications. Its most common use is in vehicle catalytic converters, with 80 percent of the metal’s offtake coming from the auto industry. Platinum is also popular in jewelry and as an investment metal.

To put the current price into perspective, platinum hit an all-time high of $2,213 an ounce in March 2008. This was higher than the record price gold hit in 2011. 

Before 2011, platinum was generally more expensive than gold. In 2015, this historical trend reversed with the spread between gold and platinum growing wider.

“Platinum is incredibly cheap relative to gold, and platinum supply is very constrained,” Sprott Asset Management CEO John Ciampaglia told Bloomberg.

The wide spread between the gold and platinum prices could represent a significant opportunity for investors. Imagine if it merely returned to a 1:1 ratio. That would represent a 200 percent gain for platinum if the gold price climbed no higher. Even a more modest narrowing of the price spread closer to historical norms would present healthy gains.

Platinum supply and demand dynamics

The market appears poised to drive the platinum price higher.

Demand for platinum has been growing, and like silver, the metal appears to be underpriced given the supply and demand dynamics.

The world platinum market charted its third significant structural deficit in a row last year, and we should expect these supply shortfalls to continue into the foreseeable future, according to the World Platinum Investment Council (WPIC). 

Platinum demand outpaced supply by 995,000 ounces last year. That was 46 percent higher than forecast. 

The WPIC expects a market deficit of around 848,000 ounces in 2025, with total supply expected to hit the lowest level in five years.

Last year, total supply rose by 3 percent, but it couldn't keep pace with surging demand.

WPIC CEO Trevor Raymond said, “The platinum market is in structural deficit, irrespective of the uncertainties posed by today’s geopolitics. We are seeing that platinum’s diversity of demand provides a significant degree of resilience even as the US government’s new approach to tariff policy starts to take effect. At the same time, it is widely recognized that platinum mine supply continues to face downside risks.”

Aberdeen Investments director of investment strategy Bob Minter told Bloomberg that the market fundamentals are finally being reflected in the price.

“For platinum investors, the long wait may be over.”

Many analysts believe the interest in gold is spilling over into the platinum market. Platinum jewelry sales were up nearly 300 percent year-on-year in the first quarter.

Bloomberg summed up the platinum market this way:

“Platinum has long been off the investor map, but the recent rally could be the start of a longer-term move on favorable supply and demand fundamentals. It won’t take much investment demand to move a market where the value of supply is just $7 billion annually.”

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