Platinum Price Slide Continues In 2024

Once dubbed the “rich person’s gold,” platinum has historically traded at a premium to gold due to its rarity and diverse industrial applications. But platinum has faced a persistent price slide over the past years.

This article will examine the drivers behind the fall of the platinum price and the outlook for its prices in the face of various uncertainties.

Understanding the Platinum Commodity

Platinum was once among the most valued precious metals, frequently trading at a premium over gold for many decades. 

However, since the global financial crisis in 2008, platinum has struggled to match the performance of gold and other precious metals.

The economic downturn suppressed demand from key platinum end-users. At the same time, investor appetite shifted toward gold as a safe-haven asset amidst central bank stimulus programs and broader economic uncertainty. 

The divergence drove gold prices sharply higher while platinum languished.

Many analysts believe the crash in platinum prices during 2008 permanently damaged investment interest in the metal. Without robust investment demand, platinum now relies primarily on industrial and jewellery applications. 

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Platinum Price Five-Year Overview

The price of platinum has fluctuated over the past five years but is on a downward trajectory overall. 

In 2020, the average closing price was $893.39, reaching a high of $1,078.44 and ending the year at $1,078.44. The price declined in 2021, with the average closing price falling to $1,088.51 despite a high of $1,293.10, ending the year at $965.84.

The downward trend continued into 2022 and 2023, with average closing prices of $958.06 and $965.28, respectively. However, the highs of $1,153.20 in 2022 and $1,124.00 in 2023 show there is still some volatility and upside potential. 

The price has stabilized in 2024, with an average closing price of $928.38 and a high of $994.25 before closing the year at $895.32.

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Factors Driving the Platinum Price Decline

Platinum prices have decreased since reaching a peak of over $1,250 per ounce in 2021. A confluence of factors on both the supply and demand sides has contributed to platinum’s bearish price performance in recent years.

1. Slowing Automotive Demand

The automotive industry is the largest consumer of platinum, using it in catalytic converters to reduce harmful emissions from gasoline and diesel engines. 

However, slowing global vehicle sales due to economic headwinds has dampened demand growth from this critical sector. 

Despite tightening emissions regulations worldwide, automakers have met standards with less platinum by substituting cheaper palladium into gasoline catalytic systems. This substitution away from platinum has lowered investment needs.

2. Fading Investment Interest

Investment demand drives platinum prices. However, platinum exchange-traded fund (ETF) holdings have fallen over 20% between 2020 and 2024, signalling fading investor appetite for the metal. 

Rising interest rates offered by bonds and other securities have also made platinum a less attractive investment asset compared to yield-generating instruments. Speculative futures positioning has also pulled back.

3. Competition from Other Precious Metals

In recent years, strong price gains for palladium, rhodium, and gold have increased substitution away from platinum in both industrial and investment applications. 

Palladium has directly replaced platinum in many automotive uses. Meanwhile, due to its superior catalytic qualities, rhodium has started supplanting platinum in specific industrial chemical processes. These dynamics have eroded platinum’s value proposition.

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4. Expanding Supply from Recycling

Recycling of platinum sourced from spent auto catalysts, jewellery, and other fabricated products has expanded dramatically, helping bridge the gap between mining supply and demand. 

Recycling now contributes over 20% of the total platinum supply annually. This increased reuse of available above-ground stocks has weighed on prices.

5. Robust US Dollar

As a dollar-denominated commodity, platinum becomes more expensive for foreign buyers when the US dollar strengthens. 

The US currency has rallied significantly due to rising interest rates and a flight to safety amid global uncertainties. This has added downward pressure on dollar-priced commodities, including platinum.

Platinum Price Outlook

What potential trajectory can we expect for platinum prices over the next 3-5 years?

Upside risks and supportive factors for prices:

• Supply deficits persisting over the medium-term
• Substitution back from palladium if the price differential widens
• Higher use in fuel cell vehicles boosting automotive demand
• Inflation hedge appeal should boost investment interest

Downside risks to the outlook:

• Global recession crimping industrial activity
• Ongoing dollar strength weighing on the commodity complex
• Further demand erosion to competing metals
• Rising mine output from Russia or South Africa

The forecast calls for choppy consolidation of platinum prices between $800 and $1200 per ounce over the next several years. 

Periodic spikes above $1,200 are possible during strong investment buying or supply uncertainties. But a breakout above long-term resistance around $1,300 appears unlikely without a paradigm shift in platinum’s demand outlook.

How to Handle a Downturn in the Platinum Market 

When platinum prices enter a prolonged downtrend, investors may question whether to buy, hold, or sell their positions. 

During periods of market weakness, the following strategies can be considered:

• Dollar-Cost Average Buying: Platinum’s price slide allows the accumulation of positions at lower average costs. Steady buying over time mitigates timing risks.
• Portfolio Rebalancing: Realign allocations across precious metals, reducing overexposure to platinum’s price volatility.
• Focus on Cash Flow: For producers, emphasize highest margin output, cost controls, and shareholder returns.
• Seek Upside Scenarios: Look for potential demand catalysts or supply shocks that could reverse momentum.

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In conclusion,

The extended slide in platinum prices highlights the risks inherent in commodity markets. While platinum once traded at a premium to gold, shifting supply and demand dynamics have led to a multi-year price downtrend. 

Traders should closely monitor the factors influencing platinum’s outlook, including industrial demand, competing metals, recycling trends, and macroeconomic conditions. 

Although platinum may stabilize and consolidate, prices remain vulnerable to further declines without a significant upside catalyst. 

Prudent traders and investors would be wise to learn about platinum’s risks and manage exposures accordingly. 

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“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.”