Platinum Prices Stuck in Narrow Range Despite Market Deficits: UBS Strategists
Platinum prices have remained steady within a tight range despite ongoing market deficits, according to strategists at UBS. Over the past three years, the precious metal has fluctuated between $850 and $1,150 per ounce, with an average around $962/oz—close to its current spot price. This stability has surprised market watchers who expected prices to rally.
UBS attributes this lack of upward momentum to elevated above-ground inventories, estimated at about 4.034 million ounces by the end of 2023. The key, according to UBS, is for this number to fall below 2 million ounces to support a significant price increase, similar to what happened in the palladium market in the past.
Looking ahead to 2025, the outlook suggests that the platinum market will continue to be undersupplied, despite an expected recovery in scrap supply from autocatalysts. The pandemic disrupted the usual cycle of cars being scrapped, keeping older vehicles on the road longer than anticipated.
UBS maintains a “modestly positive” price outlook for platinum, projecting a target of $1,100/oz by mid-2025. However, the metal is expected to underperform gold until falling interest rates stimulate stronger industrial activity. Investors with a higher risk tolerance are advised to hedge against downside price risks, as platinum is unlikely to see significant gains until above-ground inventories decrease further.
In conclusion, despite tight market conditions, platinum prices have remained stable due to high above-ground inventories. However, a potential decrease in inventories could lead to a significant price rise in the future. It is advisable for investors to consider hedging against downside risks and monitor the supply dynamics in the platinum market for potential investment opportunities.