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While platinum’s rally is not as impressive as gold and silver’s surge, the strength of the uptrend in XPTUSD is indisputable. Let us discuss this topic and make up a trading plan.
Monthly platinum fundamental forecast
Platinum retreated after reaching the first of the two targets of $1,050 and $1,100 per ounce, as outlined in the previous article. However, the price failed to hit the second target. Hawkish rhetoric from FOMC officials and growing political uncertainty ahead of South Africa’s general election forced investors to close their long trades on XPTUSD. Why not take advantage of the great opportunity to buy the metal cheaper?
The World Platinum Investment Council revised its estimates for the market deficit in 2024 to 476,000 ounces from 418,000 ounces in March. The WPIС stresses that investors will be facing a shortage for the second year in a row. Supply is expected to contract by 1% to 7.11 million ounces, while demand is expected to decline by 5% to 7.59 million ounces. This figure is above the index’s five-year average.
Platinum supply/demand and market balance
Source: Kitco.
Industrial demand for platinum is forecast to shrink by 15% in 2024 after reaching a record 2.63 million ounces in 2023. However, it is still 17% above its pre-pandemic average. Demand for the metal in the automotive industry is projected to rise by 2%. WPIC notes that the shift to electric vehicles has slowed, and hybrid vehicles that use electric and diesel/gasoline engines are likely to be adopted, keeping platinum’s demand high.
WPIС also noted that platinum jewelry demand jumped by 5% to 486,000 ounces in the first quarter. The actual data for 2024 could be significantly higher than forecasts as elevated gold prices force consumers to switch to a cheaper alternative. Exactly the same process took place in the automotive catalytic converter industry, where platinum replaced palladium, which was more expensive at the time. Now, the metals have switched places: XPTUSD quotes have been above XPDUSD since May.
Platinum and palladium prices
Source: Bloomberg.
High gold prices are driving platinum imports into China up 77% in March to a five-month peak. Meanwhile, gold supplies fell to yearly lows. Preference of platinum to gold in the jewelry sector could lead to a resumption of the uptrend in XPTUSD.
From a fundamental perspective, the uptrend looks sustainable. All precious metals tend to follow their leader – gold. It receives strong support from the formation of the bipolar world. China has increased the share of gold in reserves from 2% in 2015 to 4.3% in 2023 and reduced the Treasury bond holdings from 44% to 30%. Not surprisingly, XAUUSD is breaking records even against the backdrop of a strong US dollar and rising US Treasury yields.
Monthly XPTUSD trading plan
XPTUSD bulls will likely face temporary difficulties. During the platinum pullback, one can open long trades with the targets at $1,160 and $1,210 an ounce.
Price chart of XPTUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
