Platinum's Ascent: Can the Rally Continue?

Platinum, one of the world's most sought-after metals, has experienced a remarkable surge in price this year, breaking free from a multi-year trend of stable trading. Its unique qualities make it indispensable across diverse sectors, including automotive catalytic converters, jewellery, refining processes, emerging hydrogen technologies, and petrochemicals. However, with anticipated weakness in some of its key consuming industries, the question arises: can platinum sustain its upward trajectory?

A Skyrocketing Performance

The price of platinum, as reflected by front-month futures contracts on the New York Mercantile Exchange (NYMEX), has soared by approximately 60 percent this year as of July 14th. This includes a significant 40 percent increase during the first half of the year and an astonishing 28 percent rise in June alone. This impressive performance is particularly notable given its prior three-year period, from 2022 onwards, where prices largely remained within a range of $900 to $1,100 per ounce.

The Dynamics Behind the Bull Run

The current market dynamics clearly explain platinum's impressive rally. According to data from a leading industry organisation, 2025 marks the third consecutive year of a significant supply deficit, nearing one million troy ounces in an annual market of approximately eight million troy ounces. An expert in market research recently highlighted that the platinum market is experiencing a "structural deficit", with the 2024 shortfall of 992,000 ounces being the deepest since 2013. A deficit of 966,000 ounces is also projected for the current year.

Supply Side Pressures: The primary driver of this price surge on the supply side is the underperformance of a major global producer, responsible for over half of the world's platinum output. Data from an intelligence firm indicates that seven out of twelve mining divisions recorded annual declines in April. Specifically, a significant decline of 24.1 percent year-on-year was observed in platinum group metals (PGMs), impacting overall mining output growth. Earlier declines in February and March were attributed to rain disruptions, while the April drop was due to breakdowns and third-party supply issues, highlighting persistent operational challenges affecting mining output across the region.

Furthermore, declining supply from recycling activities has also contributed to the restriction of global platinum availability this year. While above-ground inventories played a crucial role in bridging the supply gap in the first half of the year, their dwindling volumes are estimated to cover less than four months of demand, a level described as "unsustainably low".

Formidable Global Demand: Platinum prices have been further boosted by robust global demand. This includes significant purchases by investors and consumers seeking safe-haven precious metal assets amidst market uncertainty, particularly stemming from widespread tariff impositions. A major global consumer of platinum has also imported substantial quantities this year, with reports indicating a massive 300 percent year-over-year increase in investment demand for platinum during the first quarter of this year.

Given that platinum prices are currently less than half those of gold, the white precious metal has become an increasingly attractive option for price-sensitive consumer markets. This trend is particularly evident in the jewellery sector, where elevated gold prices have led consumers to opt for more affordable platinum jewellery. As one regional head for Asia Pacific at an industry council explained to a business publication, jewellery manufacturers and distributors are seeking alternative metals to survive the decline in gold jewellery sales, emphasising the need for an affordable option.

Indeed, the industry council recently projected modest gains in jewellery demand from a key consumer market after a decade-long decline, with processing volumes for platinum jewellery expanding by a significant 26 percent in the first quarter of 2025. Similarly, shifting demand trends for platinum bars and coins have also provided further support for the precious metal this year.

The confluence of these supply and demand factors has resulted in considerable tightness in the platinum spot market this year. This was starkly evident in the period leading up to April 2nd, when a significant amount of platinum was dispatched to warehouses in a specific nation to capitalise on arbitrage opportunities before new tariffs came into effect. A commodity strategist noted that the market was "wrong-footed", as widespread tariffs were expected to dampen demand, but instead, stockpiling in different regions contributed to a depletion of global inventories.

Potential Headwinds on the Horizon?

While the first half of the year was undoubtedly spectacular for platinum, not all analysts are convinced that the precious metal can replicate this performance in the latter half. Emerging factors could potentially cap further gains, and evidence suggests that the extreme supply tightness experienced in the first six months may be easing.

According to a leading trade association for the precious metals industry, platinum lease rates have declined from their June peak of 22.7 percent to 11.6 percent. This easing of lease rates is a significant indicator, reflecting reduced competition for immediate physical supply and suggesting that the most acute phase of the supply shortage may be passing. The report also anticipates a recovery in mine supply from a key producing nation in the second half of 2025, with global platinum mine production projected to decline by only 6 percent for the full year.

The shape of the forward curve for platinum futures prices can also offer insights into the relative tightness of the spot market. Currently, the curve exhibits a "contango" shape, where the front-month contract trades at a discount to the following-month contract. This suggests that supplies are not necessarily as tight in relation to demand, alleviating concerns about a pronounced short-supply scenario.

An expert in market analysis explained that if the forward curve isn't indicating an extremely short-supply situation and investment traders are reducing their net-long positions, the current price surge could be interpreted as a "blow-off top" from a technical perspective – a sharp price rise followed by a rapid decline.

Similar to the trend observed with another precious metal this year, the sheer spike in platinum prices may become its most bearish factor in the coming months. Market sources suggest that strong physical demand from a major consumer likely peaked in early June when prices exceeded $1,050 per ounce. Analysts anticipate that upcoming import data will show declining platinum deliveries following two months of robust imports, illustrating how high prices can ultimately suppress demand.

Despite these potential short-term challenges, the long-term outlook remains positive. An industry council has projected that a significant global supply deficit will persist for at least the next five years. They noted in a recent forecast that the "platinum investment case remains compelling," with substantial market deficits from 2023 and 2024 expected to continue through their forecast period to 2029. Including 2025 forecasts, annual platinum deficits are expected to average 727,000 ounces from 2025 to 2029, representing 9 percent of average demand.

Disclaimer: The content provided herein is for general informational purposes only and does not constitute financial or investment advice. It is not a substitute for professional consultation. Investing involves risk, and past performance is not indicative of future results. We strongly encourage you to consult with qualified experts tailored to your specific circumstances. By engaging with this material, you acknowledge and agree to these terms.