Platinum production comes from South Africa and Russia. In South Africa, platinum mines yield primary production. In Russia, the metal is mostly a byproduct of nickel output from the Norilsk region in Siberia.
The Russian invasion of Ukraine, sanctions on Russia, and Russian retaliation pushed platinum prices to a high of $1197 per ounce in early March 2022. On March 15, 2022, in an article on Barchart, I wrote, “Platinum disappointed on the upside as the price fell from nearly $1200 back to the $1000 per ounce level in one week. Still, the odds favor higher prices as Russian palladium shortages could cause industrial users to shift towards platinum, a less expensive substitute that can do the same job.”
After falling to a low just below the $900 level in late April, platinum moved back above $1,000 per ounce in early June but once again, the price failed.
A long history of disappointment
The long-term bear market in platinum lasted from 2008 through 2022. A dozen years of disappointing price action demoralized anyone looking for platinum to follow gold, silver, palladium, rhodium, and other platinum group metals higher.
The chart highlights the decline that took platinum futures from $2,308.80 in March 2008 to a low of $595.90 in March 2020. Platinum made lower highs and lower lows, culminating in a spike low as the global pandemic gripped markets across all asset classes in early 2020.
After a recovery that took platinum to $1290.60 in February 2021, the pattern of lower highs reemerged. However, the disappointing precious metal has mostly made higher lows since March 2020, suggesting that the consolidation will eventually lead to a significant break to the up or downside. Since August 2021, platinum has been straddling the $1,000 per ounce level, looking bullish above and bearish below. On June 9, the price was below the $1,000 pivot point.
Another rally excites the bulls
In mid-December 2021, July NYMEX platinum futures fell to a low of $888.80 per ounce.
The chart illustrates the substantial rally that took the metal 33.9% higher to $1,190 per ounce on March 8, 2022. Another in a long string of failures took platinum to a higher low of $895.40 on April 27, and another higher low followed at $908 on May 19, 2022. In early June, the price moved back over the $1,000 level, reaching $1,038.30 on June 6, but the buying ran out of steam, with platinum falling below the pivot point again on June 9.
The move above the $1,000 level excited some platinum bulls, but they have learned to curb their enthusiasm for the metal that continues to disappoint.
The reasons why platinum will eventually break higher
The bullish case for platinum is compelling:
- South Africa is the leading primary producer. The mines are deep, and production costs have risen to levels that do not support output.
- Russia is the other producer, and the war in Ukraine, sanctions on the Russian government, and retaliation threaten fewer exports. Production is a byproduct of nickel output in Norilsk, Siberia, in Russia.
- Platinum’s density and composition make it one of the metals that clean toxic environmental emissions. Addressing climate change increases platinum demand.
- Gold and palladium rose to new record highs from 2020 through 2022. Silver moved over the $22 per ounce level for the first time since 2014, and rhodium and other platinum group metals reached record highs. Platinum has lagged far behind other precious metals.
- Platinum is a thinly traded metal that experiences price gaps and vacuums during rallies and corrections.
The case for a move higher in platinum is nothing new, and many speculators and investors have purchased the metal expecting a substantial rally. However, platinum’s price action has left them scratching their heads as it continues to fail each time it looks ready to make a move on the upside. The one unknown factor is the extent of Russian stockpiles, and Russian selling on rallies could be a reason for the consistent failure. Meanwhile, the current Russian economic woes could mean that selling has accelerated, and the stocks have declined.
Bars and coins are the most direct investment route- The pros and cons
The most direct investment path in the platinum market is via the bars and coins available from worldwide dealers. Bars and coins contain pure platinum metal, so there is no better way to invest. Meanwhile, since platinum is so rare and illiquid, dealers often charge hefty premiums for buying the physical metal and deduct discounts when owners wish to sell. Premiums and discounts are an investment deterrent as it adds prohibitive costs.
The NYMEX futures are the next level for direct investment as they have a delivery mechanism. A holder of a platinum futures contract can stand for delivery and receive a warrant representing 50 ounces of NYMEX approved platinum. The banks and depositories that hold the exchange platinum charge storage and other fees.
The PPLT is the most liquid platinum ETF product
The cleanest way to own platinum exposure without worrying about holding or storing the physical metal is via the Aberdeen Physical Platinum Shares ETF product (PPLT). PPLT’s fund summary states:
At $90.50 per share on June 9, PPLT had over $1.218 billion in assets under management. The ETF trades an average of 109,363 shares each day and charges a 0.60% management fee.
July platinum futures rose from $895.40 on April 27 to $1,038.30 on June 6, or 15.96%.
Over the same period, PPLT moved from $84.39 to $96.27 per share, or 14.08%. The physical platinum market trades around the clock from Sunday evening in the USA to late Friday. The PPLT ETF only trades during hours when the US stock market is operating, so moves to highs or lows occurring outside the stock market’s hours are not reflected in the ETF’s price.
One day, platinum will make its move, and the odds continue to favor a break to the upside. However, the compelling arguments for a rally in platinum have fallen on deaf ears as the metal continues to straddle the $1,000 per ounce level on June 9, 2022.
The waiting is the hardest part…
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