Metals Focus expects 2016 to remain a challenging year for Platinum prices

UNITED STATES January 07 2016 2:46 PM

NEW YORK (Scrap Register): The consultancy Metals Focus sees further weakness in platinum early in the year before a modest recovery. 

“After last year’s sharp fall, we expect 2016 to remain a challenging year for platinum prices, although the picture is then likely to turn moderately positive,” said the analysts at Metals Focus. 

The metal could initially be hurt by softness expected in gold and commodities generally. However, as we progress through the year, investor sentiment and hence platinum prices may well slowly improve,” said Metals Focus.

For one thing, the Federal Reserve is expected to hike U.S. interest rates conservatively and European economies improving, eventually helping the euro and thus gold. 

Still, the lack of supply cuts may keep platinum from rising too strongly. As for demand, Metals Focus looks for platinum use in auto catalysts to grow from a low base last year, but cautions that the risk of a longer-term gradual shift to gasoline-powered vehicles – which use palladium instead -- may restrain investor interest in platinum. Further, Chinese jewelry-related buying may be hurt by a slowing economy. 

As a result, even though platinum is expected to record another fundamental deficit in 2016, the shortfall appears too small to stimulate fears about physical supply, especially taking into account ample above-ground stocks. Against this backdrop, “we expect the scale of the price recovery to be rather modest later in the year,”Metals Focus added.