Hello, Reader.
In the orchestra of precious metals, platinum isn’t exactly taking the spotlight as maestro these days – or even as first chair.
While gold seems more likely to hold those coveted top spots, as we’ve explored in previous Smart Money articles, there’s a chance platinum could be getting a solo performance soon.
Historically, platinum reached an all-time high of 2,290/ounce in March of 2008, although it has lost much of its luster over the past decade and a half.
However, two industries are breathing new life into this oft-overlooked metal… and setting the stage for its potential comeback.
So, in today’s Smart Money, we’ll examine platinum’s current price and where demand could take it next.
Plus, we’ll consider whether this unsung orchestra member is worth an investment encore… and, if so, where to make that investment.
Let’s dive in…
Platinum’s Shinier Path
Despite sitting close to record lows, platinum probably has some shine left in it. A growing and persistent supply-demand imbalance could lift the platinum price to much higher levels.
While gold and platinum once rose and fell pretty much in tandem, as the chart below shows, platinum broke ranks about a decade ago and has been drifting sideways ever since. At $968 per ounce, today’s platinum price is less than half the gold price.
Platinum has been losing ground to another orchestra member as well: silver. In 2014, for example, 1 ounce of platinum would buy 145 ounces of silver. Today, that same ounce would buy only 33 ounces of silver.
In short, relative to other precious metals, platinum has never been cheaper than it is today. “Cheap” is not synonymous with “timely,” of course. But reviving industrial demand from both traditional and new sources could bust the platinum price out of its long-term funk.
Automotive demand is the leader in the platinum market. Last year, it consumed about 42% of the global platinum supply. A variety of other industrial uses consumed 30% of supply, while jewelry fabrication sucked up about 26% of it.
Taken with investment demand, all sources of platinum demand last year exceeded the global supply by a whopping 851,000 ounces, according to the World Platinum Investment Council (WPIC). Looking forward, the WPIC expects annual deficits to top 500,000 ounces in each of the next four years.
If that forecast is anywhere close to the mark, the platinum price should rise significantly over that time frame. Slowing demand growth for electric vehicles is the biggest reason to expect a rising platinum price.
Unlike internal combustion engine (ICE) vehicles, EVs do not require the platinum- or palladium-treated catalytic converters that clean autos’ exhaust. Therefore, every new EV that hits the road means one less catalytic converter.
But EVs are not conquering the global auto market as rapidly as many folks expected. Because of their 15.2% sales decline, EVs lost market share to ICE vehicles for the first time in four years.
Continuing that dismal trend, Tesla Inc. (TSLA) U.S. sales in May tumbled 11.6%, even though total vehicle sales jumped 8.9% during the month. But what’s bad news for Tesla and other EV manufacturers is good news for the platinum market.
Additionally, because the platinum price has fallen to historically low levels, some manufacturers are substituting platinum for palladium in their gasoline vehicles. This demand trend alone could be sufficient to push platinum prices significantly higher.
Then, there are a couple new kids in town that could add a powerful tailwind to platinum demand – and prices. Let’s take a look at one of them…
The Digital Disrupter
Artificial intelligence is one of those “kids.”
At present, electronics and technology end-uses account for only 3% of total platinum demand. But the tech sector’s platinum consumption could grow double-digits for several years in a row, thanks to AI.
According to research from Metals Focus, a boom in demand for AI applications will create an echo boom in demand for the high-specification semiconductors and sensors that enable AI technologies to operate optimally.
Much of this next-gen hardware contains platinum.
As the WPIC explains…
The performance of the myriad of miniature transistors and capacitors embedded into an integrated circuit is enhanced by the deposition of thin platinum films onto semiconductor wafers…
These platinum films are created using a technology known as sputtering, where platinum particles are ejected and deposited onto a surface, creating a thin (only a few atomic or molecular layers thick) platinum layer.
In all, AI-driven platinum demand by itself will not spark a new bull market in this long-slumbering precious metal. However, it could add an additional kicker to any new bull market that emerges.
And speaking of AI…
While artificial intelligence inspires a powerful precious metal symphony, especially for platinum, it’s having a much greater impact on the tech sector overall.
Today, the fear of missing out is causing folks to keep throwing money at overvalued tech stocks. But very soon the bubble that’s forming will burst.
The combined profits of big giants like Nvidia Corp. (NVDA), Meta Platforms Inc. (META), Tesla, and others now exceed almost every country in the world.
That’s why tech billionaires are heading for the exits of their own companies…
And instead buying Next-Gen Stocks.
To discover where they’re moving their money – and how you can profit alongside them – click here to learn more.
Regards,
Eric Fry
