Platinum didn’t exactly have a good 2018 and investors are wondering if it’s going to have a good 2019. Over the course of 2018, it didn’t shine as bright as palladium, its sister metal, for many reasons including the significant decrease in demand for diesel-powered cars in China and Europe, the steady performance of the US dollar, and geopolitical issues. With a trading price of US$795/ounce in mid-December, platinum has some catching up to do with palladium.
A Look Back at the Past
Platinum was less in demand than palladium in 2018, a fact that was due to the strong US dollar, the reduced demand in industrial applications, and the overall disinterest in precious metals among many investors. Platinum prices were then on a steady decline since January 2018 although there were bright spots in the otherwise dim sector – on January 19, for example, platinum prices reached its peak when it traded at $1,010. But by late September 2018, it plunged to about $776, an overall low point when compared with platinum’s performance in 2017 – it was down by about 23% from the same day on that year.
This is in stark contrast with the predictions made by several analysts including key market participants about platinum’s performance in 2018. Some of them, for one thing, believed that 2018 will see platinum prices gradually rebounding, thanks to the small deficit and contraction in supply combined with the increasing demand for the precious metal.
But the predictions didn’t come true, as proven by the decrease in investor interest coupled with the short-lived increase in demand. The platinum prices then stalled and then dipped as a consequence.
As previously stated, platinum struggled due to the decrease in demand for its industrial use primarily as an auto-catalyst in diesel engines, as well as the decrease in demand for it in the jewelry sector. Its status as a precious metal store of value has even taken a hit, not to mention that there was a significant market surplus of the precious metal.
Platinum investors were probably irked that while the prices for platinum dipped, the prices for palladium surged. Add the fact that with a strong US dollar, the interest of the general public in precious metal investments isn’t as strong as those in the industry would like it to be.
A Look at the Future
But some market analysts and investors are still optimistic about the performance of platinum in 2019. The supply should slightly increase on the back of higher production output from North America. The demand is also predicted to increase although it will be not as robust due to the continuing decline of sales in diesel engine vehicles.
With the supply overhang gradually narrowing, the prices would likely increase. The positive impact should attract more investors to platinum.
But there’s also the possibility that supply will decrease in 2019, partly because of the unresolved issues in platinum mining in Africa in general and South Africa in particular. Emphasis must be made that Africa accounts for more than 70% of worldwide platinum supply so issues affecting the resources-rich continent will have an impact on platinum prices.
Currently, South Africa’s mining industry is struggling under the weight of multiple issues including weak infrastructure and wage-related labor strikes. The inefficient costs of mining platinum at deeper depths coupled with depleting reserves are also contributing to the reduced production in the Dark Continent.
If there’s a shrinking supply in 2019, there will likely be an increase in platinum prices due to concerns about a potential deficit in supply. Investors may well spring into action to ensure that they have platinum in their precious metals portfolio.
Aside from the decrease in platinum production, the demand for it among certain sectors will likely increase in 2019. The platinum prices will increase, if only slightly or moderately, thanks to the stronger industrial and jewelry demands. This should offset the decreased demand from the automobile sector.
As you will observe, market watchers are cautioning investors to set realistic expectations about platinum’s performance in 2019. With the above-mentioned factors, don’t expect a significant turnaround for the precious metal. Instead, the prices will likely remain subdued and the return on investment respectable, not considerable.
Investors should also watch out for the turn of events between the United States and China, especially in the countries’ ongoing trade wars. The evolution of events will have a significant impact on the ups and downs of platinum prices in 2019.
Be sure to watch for the ups and downs of the US dollar, too, as it will have an effect on the appeal of platinum among investors and even on the general public. The stronger the US dollar, the lesser the interest in precious metals will likely be as a general rule.
Platinum may well perform better in 2019 than it did in 2018 so keep your hopes up!