Factors that Will Shape the Future of Platinum
Platinum is an investment metal that is rarer than gold and has found a special place in the portfolio of global investors. It offers tremendous potential for capital gains for people who understand the dynamics of this precious metal. Smart investors use the metal to diversify their portfolios and hedge against inflation.
Here are some factors that you need to keep in mind when dealing in platinum.
Platinum Jewelry
In 2021, an estimated 2 million ounces of platinum were utilized in the jewelry industry alone. With the start of the wedding season this year, it’s safe to say that this demand for platinum jewelry is expected to increase in 2023, which might increase its price.
Demand in the Automobile Sector
The metal is conductive and resistant to corrosion, which makes it perfect for the automotive sector to build diesel exhaust catalytic converters.
With palladium prices at a record high due to Russia’s invasion of Ukraine, a lot of auto manufacturers are making the switch from palladium to platinum to build vehicles with fewer emissions. This can lead to a price increase in the future. Just like palladium, the silvery white metal is a key component used to build fuel cell-powered vehicles and investors need to keep track of green vehicle production to estimate the future price.
However, due to the current semiconductor shortage, demand for platinum has decreased this year. Prices for platinum are expected to jump once the shortage ends and fuel prices go back to normal. It’s important to note that people tend to buy fewer vehicles when gasoline prices are high.
Supply Matters
Platinum is mostly mined in South Africa and any disruption in the mining process can lead to price hikes. At the height of the pandemic, mining operations were suspended, which caused the prices of platinum to spike. Even though supply has gotten back to normal, if similar disruptions are to happen in the future, for instance, due to labor strikes in South Africa, then platinum’s price might rise again. This is why industry professionals and investors keep a close eye on mining operations.
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