Platinum Price: The bear market is intact

Raw materials in this article

by Emmeran Eder, Euro on Sunday

APlatinum has also been caught up in the downtrend in precious metals. The metal has fallen from $1,100 an ounce to $875 since early March. Recently, the downward trend has intensified because, in addition to the precious metals, the industrial metals are also correcting and platinum is a hybrid of the two.

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One reason is the strong dollar, which makes raw materials more expensive outside the USA. In addition, there are fears of recession worldwide due to many central banks raising interest rates to combat inflation. A global economic crisis would dampen demand for base metals. The auto industry would also suffer. However, a good 40 percent of the global demand for platinum comes from the automotive industry, as it is primarily used in catalytic converters in diesel vehicles. Since the outbreak of the Ukraine war, high fuel prices have also led to fewer diesel vehicles being registered in Europe.

Another important area of ​​application is the jewelry industry. It seems to be stagnating this year. On the one hand, this is due to high inflation, which causes consumers to save on non-essential expenses. The most important jewelery market is also China. Due to corona-related lockdowns and low consumer spending caused by the weakening economy in the Middle Kingdom, demand for the metal has also fallen there.

Investment demand has also been listless since the beginning of the year, with net ETF metal outflows of 266,000 ounces (8.3 tons) by the end of June this year, already exceeding inflows for 2021 as a whole.

Big short positions

No wonder, then, that platinum is forecast to have a significant supply surplus in 2022. That looks pricey. It is therefore difficult to find any signs of hope for a recovery at this time. The fact that the mood for the metal is very bad can actually be interpreted as one of the few positive signals. Net short positions in financial markets are at their highest since September last year. “In the past, such a negative attitude was often an indicator of an impending turnaround,” says Carsten Fritsch, a commodity analyst at Commerzbank.

But before it gets better, it’s likely to get worse. The chart technique also speaks for this, where the next strong support is only in the area of ​​700 dollars per troy ounce.

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Image sources: Julian Mezger