My Prediction for 2018 — This Forgotten Metal Will Soar

Despite a 6-year decline in the price of platinum, it wouldn’t surprise me to see platinum prices rise 25% next year. Here's why it will happen.

Editor’s Note: Welcome to our week-long special series! Our editors for both the Sovereign Investor Daily and Winning Investor Daily are looking ahead to 2018 and providing their insights into what they believe will be the big movers and shakers for the new year. They are also looking at critical steps you can take to preserve and grow your wealth. Happy reading! — Jocelynn Smith, Senior Managing Editor

 

It was a brutal six years for the mining industry. While some metals saw their prices rebound in 2017, others didn’t.

There is a formula for rising prices — demand must exceed supply. In some cases, like zinc, a lack of investment meant supply fell below demand. Copper, whose price rose 27% since early 2016, is another metal that will struggle to meet demand.

In 2018, a different metal’s price will begin its rise…

Platinum’s New Trend

Here’s a six-year price chart of platinum:

Despite a 6-year decline in the price of platinum, it wouldn’t surprise me to see platinum prices rise 25% next year. Here's why it will happen.

You can see the steady decline from 2011 to 2016. The price fell by more than half to January 2016. There was a brief rebound that year. Then the price collapsed to its lowest price in two years earlier this month.

The question is: Why do I think this trend will change in 2018?

The answer is simple … supply can’t keep up with demand. In 2017, the supply/demand number was almost even. According to the World Platinum Investment Council, 2017 will end with a small deficit, around 15,000 ounces.

However, that same group expects the gap to expand. In 2018, demand for platinum will rise 2% to 8 million ounces. Supply will fall by 1% to 7.75 million ounces. That means the deficit will be 250,000 ounces.

An Extreme Low for Platinum Prices

In the past, this kind of deficit was enough to draw platinum sellers out. However, the platinum price is sitting at an extreme low. Without a significant increase in price, there won’t be an incentive for sellers. That’s one reason I expect platinum prices to rise in 2018.

But there’s another reason … sentiment.

One of the reasons that copper prices rose so rapidly in 2017 was the idea that electric vehicles would spur demand. That’s right, the price of copper rose because of expected demand. On the opposite side of the coin, platinum prices fell because of a lack of expected demand.

Platinum’s main commercial use is in diesel catalytic converters. In the wake of the Volkswagen scandal, where the company admitted to faking diesel efficiency, the perception of diesel cars fell. And so did the perception of platinum.

In other words, investors didn’t think demand for platinum would come, so they didn’t buy platinum. And so, the price fell.

From a supply perspective, platinum is far worse off than either zinc or copper. Platinum isn’t widespread. Most of the existing mines are deep, old and running out of metal. There aren’t many new platinum mines on the horizon.

Add that to low prices (which spur demand) and a stronger European economy (that prefers diesel cars). That will change platinum’s fortunes in 2018. It wouldn’t surprise me to see platinum prices rise 25% next year.

Good investing,

Matt Badiali

Editor, Real Wealth Strategist

9 comments

Dear Matt, Of what value is this article? I could not find any actionable information here what so ever, are you advocating buying the metal, taking a wait and see approach, buying one of the very thinly traded ETF’s? Or doing nothing? What you effectively wrote is this may or may not happen. Yes eventually platinum will be both Higher and Lower than it is today, that is the nature of markets. Please in the future, be specific, what are you advocating and not just putting pure conjecture out, that is not how money is made in the markets.

I would agree. It has slowly lost half my its value over the last 8 years. Perhaps it is forming a base but there are no volume indicators in the article to back up any other historical basing in metals. Nor are there any hints of indicators showing a return to the metal.

I would say it stays depressed. Jewelry was a huge for platinum but now there is a new breed of consumer in that industry. Take for instance Alex and Ani a wholesaler. They do beautiful metal finishes with cheap metals and they are really nice. This is department store selling and that is huge.

Until some sort of platinum demand returns I think it best to take a wait and see approach

That is a futures contract so you can buy futures. Just not through your brokerage firm. Really you need a separate account and can open up online. Just google futures trading.

It’s a different kind of investment futures. You purchase a metal or food staple for instance corn. When you do, it is in the form of a contract that expires.

So if you bought say 2000 pounds of corn and the contract was going to expire in a couple more days it is best you sell it before the contract expires or roll it into the next futures contract.

If you don’t you could end up with 2000 lbs of corn at your door step! Yes a contract, upon expireration, is physically delivered.

Leave a Reply