Individuals who want to make money by investing in platinum might benefit from knowing that the precious metal could potentially experience substantial appreciation in the near future due to the market trends for this commodity.
Platinum is benefiting not only from favorable demand fundamentals, but also supply challenges that are being created amid a highly uncertain environment.
Strong demand for platinum
The demand for the precious metal is being fueled not only by purchases of jewelry, but also by rising production of automobiles, which increases the need for catalytic converters that contain platinum. In addition, some have noted that manufacturing firms have been using larger amounts of the metal as a raw material in their production of goods.
Various market experts have provided statements about demand for the precious metal, and individuals who want to make money investing in platinum might benefit from heeding these communications. One individual who seems fairly bullish about the commodity is Carlos Sanchez, director of commodities at New York’s CPM Group, according to International Business Times.
Sanchez told the media outlet that purchases of the precious metal have been rising across the world. He noted that emerging markets are one area in particular where this demand has enjoyed notable increases. The market expert said that manufacturers in the United States have been requiring more of the precious metal.
Strong state of auto industry
He also observed that in Europe, the automobile industry has been showing signs of improvement. Companies in this particular sector have need for the commodity since the catalytic converters used by vehicles help to reduce emissions, according to the news source.
This perception that the region’s auto sector has been growing is supported by data indicating that in August, the production of factories in the euro zone rose at the sharpest rate in more than two years, The Wall Street Journal reported.
The strong performance of this industry was also supported by data provided by analysts at Barclays, who stated that during this month, the top 16 auto makers experienced a 5.3 rise in production, according to International Business Times. The United Kingdom and Germany were singled out as having particularly strong activity.
Since Europe in particular has a substantial share of the market for diesel catalytic converters, the robust improvement in factory activity helped support positive sentiment surrounding the demand for platinum, The Wall Street Journal reported.
Robust demand for platinum jewelry
Another market trend that could serve to support the price of the commodity is demand for jewelry containing the precious metal. Barclays analysts recently stated that according to trade data provided by China, purchases of items containing platinum could have been bolstered by low prices, Platts reported.
Suki Cooper, precious metals analyst for Barclays, wrote in a report that the recent weakness in the price of platinum has been “triggering high volumes in September as demand remains price responsive thus supporting prices on the downside – a trend we expect to continue,” according to the news source.
In August, there was a 33 percent surge from the prior year in the amount of platinum traded on the Shanghai Gold Exchange, the media outlet reported. The jewelry industry was the largest factor contributing to this trading activity.
In addition, such increases in the demand for these items have been observed across the world, according to Kitco News. CPM Group wrote earlier this year that in 2012, global purchases of jewelry surged 7.3 percent from 2011. Global market participants were drawn to the metal by lower prices.
Global supply concerns
While the price of platinum could easily receive support from the various factors that are helping to drive demand, platinum might also be pushed higher in value because of the concerns there are about the global supply of the precious metal.
Individuals who want to make money by investing in platinum might benefit from knowing about the highly-volatile nature of platinum production. South Africa in particular has been facing significant turmoil, and Sanchez has noted that mining in this particular nation has been facing various problems, International Business Times reported.
“South Africa has had ongoing issues – labor problems, rising high cash costs – and that has provided a floor to the platinum price,” Sanchez told the news source.
The production challenges that platinum mining firms face in this nation are certainly not new, as Howard Wen, precious-metals analyst with HSBC, recently told The Wall Street Journal that South Africa, which produces 73 percent of the world’s platinum, experienced declines in output in 2012.
“Last year platinum output was cut by 300,000 to 400,000 ounces, and the concern is that something similar would happen,” Wen told the news source. He said that in 2012, South Africa created 4.1 million ounces of the 5.64 million that were created worldwide.
The production situation in South Africa could potentially deteriorate, as there is substantial ambiguity surrounding what will happen as a result of the wage negotiations that are being held, Barclays analysts wrote recently, according to International Business Times.
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