A 6% price drop since the beginning of the year amid record platinum shortages suggests that the metal is undervalued. However, will XPTUSD bulls be able to capitalize on the strong fundamental data? Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Highlights and key points
- A record platinum deficit of 1 million ounces is expected in 2024.
- The fastest-growing sectors are investment, up 15%, and jewelry, up 7%.
- A soft landing of the US economy will allow the XPTUSD to reduce its handicap with the XAUUSD.
- Platinum may reach $1,050 and $1,150 per ounce.
Platinum fundamental forecast for 6 months
Buy low, sell high. Platinum’s reluctance to follow the precious metals sector leader, gold, coupled with strong fundamentals, suggests that the XPTUSD is highly undervalued. The World Platinum Investment Council forecasts that the market deficit will grow from 731,000 ounces to a record 1 million ounces by 2024 and notes that prices have been slow to respond to the growing imbalance.
The current global economy is characterized by slowing growth and high global risk appetite, supported by massive fiscal and monetary stimulus during the 2008 crisis and the 2020 pandemic. As a result, precious metals with a high share of investment demand and a low share of industrial use are particularly popular. For gold, the latter is less than 15%, for silver almost 60%, and about 80% for platinum. Therefore, XAUUSD prices have risen by 22% since the beginning of the year, while the XPTUSD has dropped by almost 6%.
However, the higher gold prices rise, the more consumers turn to alternatives. Investment demand for platinum rose from 117,000 ounces to 462,000 ounces in the second quarter, largely due to 444,000 ounces of inflows into ETFs. By the end of the year, WPIC expects demand to rise by 517,000 ounces, 15% higher than in 2023. Jewelry demand is forecast to rise 7% to 501,000 ounces.
Imbalance in the platinum market
Source: Bloomberg.
The World Platinum Investment Council underestimates the growing interest in a metal that is cheap compared to gold. The final numbers in 2024 will be higher, which will allow the XPTUSD to skyrocket.
WPIG expects industrial demand to rise by 1% in 2024 and supply to fall by 1%, resulting in a deficit of 1 million ounces. At the same time, platinum consumption in the automotive sector will reach a 7-year high of 3,237,000 ounces despite a reduced forecast for vehicle production to 91.1 million units. The metal’s appeal will be buoyed by growing interest in hybrid cars.
The panic about the approaching recession in the US economy is unfounded. The Fed will manage to provide a soft landing, which will support precious metals commonly used in industrial applications. At the same time, the cycle of monetary expansion by the Fed and other central banks, coupled with the undervaluation of platinum relative to gold, will provide a tailwind for the XPTUSD due to the continued high and growing demand in the jewelry and investment sectors.
XPTUSD trading plan for 6 months
Thus, strong fundamentals, including a record market deficit and increased capital inflows into ETFs, against a favorable backdrop for platinum, allow us to expect platinum prices to rise towards $1,050 and $1,150 an ounce in three or six months. The recommendation is to buy.
Price chart of XPTUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
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