A List Of Factors Affecting Platinum Prices In 2016

Thursday, May 26, 2016

Why does the price of platinum go up or down? Like any other investment, hindsight always seems to be the most powerful tool for weighing the value of a specific investment. But if you want to know where platinum prices are headed in 2016, it pays to be well-informed about the specific variables that platinum investors watch. Here are just a few, along with some recent highlights from the news:

  • China jewelry demand. China is the largest market in the world for platinum jewelry - with other nations like, India and the United States,  tending to prefer silver and gold - and therefore, much of the demand for platinum jewelry will depend on how Chinese consumers’ tastes go. Reuters points out that this has recently gone cold. The World Platinum Investment Council, however, is projecting that increased demand from other countries may help offset these changes in 2016.
  • Investment demand. Like gold, platinum has demand built into it because many people like to invest in precious metals in order to avoid having all of their money in cash or equities, particularly if negative interest rates get more popular across the world. Although gold’s prices suggest that gold is a more efficient store of wealth right now, platinum certainly has a spot in the portfolio of precious metal lovers.
  • Ratio to gold. Much is made of the gold and silver ratio. But what about platinum, which has at times been higher than gold, and looks to be at a relative discount to the yellow metal right now? BullionDesk points out that the discount of platinum under gold was, at one point, some $360. Although this is not a hard and fast rule, it’s something for investors to keep in mind if platinum does reach a significant discount over gold in the future. Recent prices have seen platinum come back up - but over the long term, keep an eye on this.
  • Production issues. Like any other commodity, production issues will have a tremendous effect on platinum prices. That’s why it’s important to keep an eye on labor negotiations. Although many investors typically look at this kind of news for hints about copper prices, there’s no reason that the same logic does not, also, extend to precious metals like platinum.
  • Supply. We can’t talk about demand without also addressing supply - after all, production of platinum changes to supply and is one of the reasons the previous point holds up. To keep up on the latest news in platinum supply, be sure to follow the World Platinum Investment Council’s section on platinum supply.
  • Auto demand. Platinum is used in catalytic converters, which means that the auto industry has a say in the price of platinum. Pointing out that global consumption of platinum might increase by 2% this year, the Nikkei Asian Review shows some bullish news for platinum.

If you’re interested in precious metals but don’t see much happening for gold this summer, platinum is an interesting alternative that’s always worth a look. But make sure you understand all of the variables before making a move yourself.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.