Platinum has been nicknamed "the gold of the rich" for decades. Platinum usually trades at a higher price than gold. Although gold mines are mined around the world, the vast majority of platinum comes from South Africa and Russia. In Russia, platinum group metals are a by-product of nickel mining because nickel ores contain platinum group metals. Like gold, platinum is an industrial metal as well as a financial asset. Platinum is the platinum group metal (PGM) with the highest density and melting point. Platinum group metals are used as catalysts in automotive, petroleum and petrochemical refining, fiberglass manufacturing and many other applications.
As a financial asset, platinum reached an all-time high of $2308.80 an ounce in 2008, making it the most valuable precious metal at that time. At the same time, the global financial crisis caused many platinum investors to end in the short term, so platinum prices fell to $761.80 an ounce in October 2008. It has fallen by 67% in five months, leading many investors to vow never to come into contact with such unstable metals again.
In March 2020, platinum experienced another collapse, falling to an 18-year low of $562 an ounce, giving investors an incredible buying opportunity. Platinum doubled from its low over the weekend, and the price of platinum doubled from that low half a month ago, which may be just the beginning. PPLT (Platinum ETF) tracks the price of rare and precious metals.
Platinum lags behind other precious metals for many years.
Platinum has been in a bear market since peaking in 2008, at just over $2300 an ounce. Gold, silver and palladium all hit significant lows in late 2015 and early 2016; gold fell below $1050, silver fell to $14 and palladium fell to $451.50. Rhodium, a platinum group metal traded only on the spot market, fell to $575 an ounce. Platinum fell to $812.20 an ounce in early 2016. In July and August 2016, the price of gold rebounded to $1377.50, silver to a high of just over $21 and palladium to nearly $750a troy ounce. Platinum rose to a high of $1199.50, but the price of the rare metal has been falling ever since.
Another significant low for precious metals occurred in March 2020, as the epidemic reduced the risk of market selling in all asset classes, so the price of gold fell to $1450.90 after breaking the 2016 high in 2019. Silver fell to a low of $11.74, the lowest level since 2009. Platinum soared to an 18-year low of less than $565, although palladium hit a low of more than $1440 an ounce last year.
By the end of 2020, the prices of all precious metals will be much higher than at the beginning of the year; gold is at the level of $1900, silver is over $26.50, and palladium is over $2450 an ounce. Platinum closed at $1073 last year, almost double its 2020 low, but still lags far behind other precious metals. Rhodium, a by-product of South African platinum production, reached a staggering $14500 an ounce on December 31, 2020. The low price of platinum has led its producers to cut production, resulting in a shortage of rhodium. In 2020, the price of gold rose to an all-time high of more than $2000 an ounce. Palladium reached an all-time peak of more than $2800, while silver rebounded to its highest level since 2013, reaching $30 an ounce. At the same time, platinum prices are still less than half their 2008 highs.
A technological breakthrough that broke through the high point of August 2016
After more than a decade of trough, the key technical resistance level in the platinum market is $1199.50, a peak in August 2016. In February 2021, that level finally eclipsed.
Platinum still has a long way to go compared with gold.
Platinum has a long history as a financial asset. Like gold, platinum belongs to the same unique category. In November 2020, platinum traded more than $1000 lower than gold. In the 40 years from 1974 to 2014, platinum typically traded $100 to $200 higher than gold. In 2008, when platinum reached an all-time high, the premium soared to more than $1100 a pound. By November 2020, the price had reversed to more than $2100 an ounce, surpassing the price of platinum or gold.
On February 19th, April gold futures closed at $1777.40, while platinum closed at $1293.10 in April, with a gold premium of $484.30. Although platinum has made a big comeback, it still needs time to return to its historical normality of a small premium to gold. As prices turn bullish, platinum's history as a financial metal is likely to make a comeback.
Compared with palladium and rhodium, the effect of platinum is more obvious.
The density and heat resistance of platinum make it one of the industrial metals that can purify waste gas.
Platinum and palladium prices fell to a low in early 2016, with platinum at a premium of $360 over palladium. At about the same time, the price of platinum was nearly $470 higher than that of its by-product metal rhodium. On February 19th, with palladium futures trading at $2369.20, platinum was still more than $1075 cheaper than its sister platinum group metals. In addition, the mid-point rhodium price is $22000, $20700 higher than platinum.
These three platinum group metals can purify exhaust emissions in automotive catalytic converters, refinery catalysts and many other industrial applications, but jewelry manufacturers also need these three metals. Platinum can replace palladium and rhodium, and the price difference makes the replacement more attractive.
Lack of liquidity can promote the development of platinum-PPLT is the most liquid ETF product.
Each platinum futures contract contains 50 ounces of metal and 100 ounces of gold. As of Feb. 19, the total amount of outstanding long and short positions in platinum and gold futures markets was 75562 and 494183 respectively. Total open interest in platinum is 3778100 ounces, while gold futures is 39418300 ounces. The platinum market is less than 10 per cent of the gold market, which means it is much less liquid. Although about 200000 to 300000 gold futures contracts change hands on average in a trading day, the average platinum turnover is less than 20, 000 contracts. Since platinum contracts are half of gold contracts, turnover is usually less than 5 per cent of gold trading volume.
Illiquid markets tend to be more volatile and more vulnerable to spreads, in which bids or bids disappear and prices vacuum to levels where liquidity returns. If platinum is about to rebound sharply after falling behind other precious metals for years, this lack of liquidity could have an impact on investors and traders who hold long positions in the metal.
The most direct way to take a platinum risk position is to buy platinum bars and coins through the physical market. The futures traded by the (CME) (NYMEX) division of the Chicago Mercantile Exchange have a physical delivery mechanism, and the physical price and the futures price tend to be consistent during the delivery period. PPLT (Platinum ETF) provides another option for market participants looking for platinum exposure without having to venture into physical or futures. PPLT holds 100 per cent of its "physical platinum" of $330 million in net assets. On average, ETF trades more than 240000 shares a day, with a fee ratio of 0.60%. Platinum futures rose 64.15% from $821.30 in late September to a new high of $1348.20 on Feb. 16.
Over the same period, PPLT rose 57.35 per cent to $122.48 from $77.84 a share. In the United States, platinum trading lasted from Sunday night to late Friday afternoon. ETF trades only during trading hours in the US stock market, and when the US stock market is not running, there tend to be highs or lows, resulting in price spreads.
PPLT is a product that should continue to track platinum prices. If the price trend of palladium and rhodium is a model of platinum, then we may see a long-overdue catch-up period for platinum, which has lagged behind in the past few years. (source: Barchart.com)
World Platinum Investment Association
Tip: this information is for reference only, does not represent the views of the World Platinum Investment Association, and does not constitute or should not be regarded as the investment advice of the World Platinum Investment Association.
Note: this press release is selected from the real-time industry news of foreign industry news websites, translated and edited into Chinese by the World Platinum Investment Association for readers' reference. In order to respect intellectual property rights, if any media want to reprint, please indicate the origin of the article and the source of the translation.
