After underperforming the precious metals pack’s rally last year, all parameters are pointing to a perfect storm brewing this year for platinum, says MKS forecast for 2021.
Platinum closed last year just 10% higher despite monetary stimulus and the onset of the global pandemic, but demand for the white metal is expected to exceed supply this year though a large supply deficit will likely narrow.
“Further recovery in the automotive sector and increased interest in green hydrogen technologies and fuel cells in electric vehicles shall provide some decent support,” says the report.
Around 40% of the global demand for platinum is from the automotive industry as it is used to clean up exhaust systems. Yet another 35% of the demand comes from jewellery, of which China remains the heavyweight.
“Demand from the jewellery sector, especially in China, is set to grow after several years of modest demand,” MKS added.
China’s economy has been the first to recover from the ravages of covid, and the economic rebound is widely expected to strengthen further this year.
“We expect investment demand to increase throughout the year as platinum is almost half the price of gold and far behind palladium and will remain an attractive and relatively ‘Inexpensive’ alternative,” the report added.
Gold prices are currently at $1,840/ounce, while platinum is ruling at $1,099 and palladium prices are currently at $2,386.
MKS expects platinum to average around $1,205/ounce and to peak at $1,450.
Gold, silver to remain bullish
Gold and silver are also expected to maintain their bullish momentum this year, after recording growth of 27% and 47% last year.
After climbing to a high of above $2,000/troy ounce last year, gold will likely record a fresh high of around $2,350/troy ounce, the report said.
“While the global economic recovery shows some positive signs, we will continue to face uncertainties especially in the first half of the year,” says the report.
“In the context of low global real interest rates, a slow recovery in growth and, higher market volatility and a weakening USD, gold shall remain an asset of choice in investors’ portfolio as a safe haven and insurance against disruptions,” it added.
“More inflows into Exchange Traded Funds (ETFs) and increased physical demand, especially towards the second half of the year, shall comfort the upside trend.”
Higher gold prices will also support silver due to the historical gold-silver ratio, whereby silver tends to track the price of gold.
But volatile trading in silver is likely to continue even this year amid the uncertain industrial recovery. Silver has wide industrial applications, apart from its use in jewellery.
Silver prices are expected to average $22/ounce with the high seen at around $40/oz.