The impact of the COVID 19 pandemic has created huge supply shocks even in obscure places like South African Platinum mines. As the pandemic continues, ever-changing supply and demand fundamentals keep investors wondering if Platinum is highly undervalued today.
Gold and Silver have been big winners this year outperforming DOW Stocks and the S&P 500. Platinum prices have been flat, downright flat but could make the next big move up in the precious metals family.
Here’s the bull case for Platinum according to the latest research from the World Platinum Investment Council (WPIC).
- Platinum demand dropped 19% during the second quarter as vehicle sales, jewelry, and industrial activity slowed in lockdowns.
- Production disruptions in South Africa due to COVID-19 lockdowns caused Platinum mine supplies to drop 35% between April and June.
- Previous forecasts estimated a 247,000 ounce Platinum supply surplus. The WPIC forecasts a supply deficit of 336,000 ounces.
- Growing investor interest in the surging precious metals market has Platinum Etfs inflows rising to all-time inventory highs.
- Between April and June, investors bought 133,000 ounces of platinum bars and coins. At the current pace, bar and coin demand is forecast to grow to 600,000 ounces.
The Platinum Value Proposition
Platinum’s discount to gold is at unprecedented levels as gold prices trade above $1,900 an ounce. That makes Platinum about $1,000 an ounce cheaper— or investors might say the “far the stronger value.”
While platinum demand from industrial automotive uses have fallen, a strong rebound in car sales are expected worldwide. One bright spot is the report says China’s platinum auto demand is expected to grow 27% year-on-year. Platinum jewelry demand, hurt by retail COVID lockdowns, should also recover.
Summary: COVID has caused, and will cause, significant demand issues for Platinum. But, investors are speculating and filling the Platinum demand gap. Ahead, there will be major supply shortages of physical Platinum over the next year. Just coming to light is the impact of South African COVID shutdowns on Platinum mining, smelting, and refining processes now projected to create a supply deficit of 336,000 ounces.
Recommendation: Consider adding a little Platinum to a precious metals portfolio as speculation on supply shortages and long-term to diversify your core holdings.