What is going on with platinum prices in the market these days? Back in the middle of April of 2016, the price of platinum was depressingly low for investors, as it almost went down to $940 per ounce. Then it crept back up, and by May it was approaching the $1,100 mark as it went past $1,080. Then suddenly the news about lower Chinese consumption came in and so by June it came right down to $960. It went back up to $980, and on June 10 the price is now at $1,000. What’s accounting for all these movements?
Explaining the Price Movements
As in all matters, it’s about the supply and demand. This may change from day to day, but according to the experts the long term forecast is very good for platinum.
It helps that platinum is now so very popular in the jewelry industry. Like gold, platinum is a precious metal. Everyone knows that gold is valuable, but platinum is the gold for rich people, it seems. Over the last 3 decades, platinum has been priced far above gold.
For the moment, that’s not true at all. The most recent drop in prices followed the announced of the decrease in the demand for platinum jewelry in China.
Why is Platinum Jewelry so Popular?
In general, platinum jewelry is popular all over the world as marketing specialists have succeeded in educating consumers to the wonders of platinum.
- It’s rare. It’s one of the rarest precious metals in the world, and rarity is always a valuable trait. It’s so rare that even gold is more common. Every year gold production is at about 2,800 metric tons. The global production for platinum each year is comparatively paltry, at less than 250 metric tons a year.
- It’s beautiful. It’s silky, and it shines and shimmers. Compare platinum to white gold and sterling silver, and the gorgeous shine and silly polish of platinum is clearly more appealing. It also goes well with so many outfits in your wardrobe.
- It lasts a lifetime. Platinum is very popular especially for wedding rings and engagement rings, because its beauty doesn’t fade. It doesn’t lose its color and shine, so as an investment it just makes sense.
- Easy maintenance. Keeping it beautiful also doesn’t take much effort. A fast steam cleaning from a professional jeweler every now and then will do to keep it looking magnificently stunning. It’s not like sterling silver, which tends to tarnish and needs a lot of cleaning effort.
- Metal allergies are quite common, unfortunately. Some people are just allergic to jewelry metals like nickel, silver, and even gold, and they get skin rashes after being in contact. But platinum is naturally hypoallergenic. If you have sensitive skin, this is the perfect jewelry metal for you.
- Easy to sell. No one wants to think about selling their precious jewelry. But at least you know that if you have need of immediate cash, you can sell these at a jewelry shop or a pawn shop and get top prices.
Where Goes Chinese Demand, So Goes the World
Nowhere is the demand for platinum as strong as in China. This country is without a doubt the most ardent fan of platinum metal. It’s the biggest market for platinum jewelry in the world, as about 60% of the world’s platinum jewelry goes to satisfy Chinese demand. Chinese jewelers are the biggest group of platinum byers in the world. In 2015, they bought 1.561 million ounces of platinum to make their jewelry pieces.
So if there’s a dip in the demand for platinum jewelry in China, then it’s not surprising that there will be a drop in the world platinum prices. The saving grace here is that with lower prices for platinum, the price of platinum jewelry also becomes more affordable—and that can be very hard to resist among consumers.
Platinum Demand Is Bound to Rise
The projection among experts is quite optimistic for platinum. One reason for this is that producers are cutting back their production of the metal. One report sets the drop in production at about 5% for 2016. Societe Generale SA projects a shortage of 190,000 ounces for platinum in 2016. The World Platinum Investment Council thinks the deficit will even reach 455,000 ounces. So as the supply dwindles, the price should react and rise accordingly.
Another reason for this has got to do with the automotive industry. Car manufacturers account for about 40% of the demand for the metal, as it is crucial for materials used to reduce harmful car emissions. As governments around the world (including China) are calling for tougher vehicle emission standards, the demand for platinum will definitely increase.
That’s the general outlook for platinum these days. The dark days of low prices for platinum will soon be over, and it should start rising again in 2017 if not sooner.