Platinum is an important precious metal. It is found mostly in South Africa and Zimbabwe. Like other precious metals, it is found deep inside the earth’s crust. This makes it an expensive metal to mine, which leads to depressed margins for the miners. This also makes the industry a very difficult one to enter.
Platinum is mostly used in the automobile industry. In it, it is used as a catalytic converter. This means that it is used to help suppress the amount of pollutants that are emitted by vehicles. It is mostly used in gasoline cars. Palladium on the other hand is mostly used in diesel vehicles.
In recent months, there have been concerns about the need for platinum in the future. This is because of the fact that the automobile industry is seeing a disruption. In many cities, the rapid transport systems are so good that people don’t have the need to own cars. In other cities, new systems such as scooters have come up and gained a lot of acceptance. In fact, Bird, a scooter company reached unicorn status within 2 years. The industry has also seen disruption from ride sharing companies like Uber and research is now going on on self-driving cars. In fact, in the next few years, these cars will be mass produced. Further, many countries have announced that they will eliminate the combustion engine in the next few years. With all these factors, there has been a perceived decline in demand of platinum.
However, before all these happens, the demand for platinum will likely be there. In fact, yesterday, China announced that it will reduce tariffs on imported vehicles by more than 50%. This will see increased motor vehicle purchases.
As of this writing, the price of platinum is at $833 per ounce. This is higher than the YTD low of $755. These gains have happened since August but the upward momentum has eased in the past week. There is a likelihood that the price of platinum will continue to go up if there is demand in the automobile industry and if the dollar strength weakens. If it does, it will likely move to the $900 level.