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The platinum price has fallen further in recent months and even reached its lowest level in ten years last week in euro terms. Why is it that the price of this precious metal has performed much worse than gold and silver in recent years? And how interesting it is to look at the current Investing in platinum?
According to CPM Group commodity analyst Jeffrey Christian, platinum price is currently under pressure due to the Negative sentiment among investors. Investors expect that the rise of electric cars will cause a decline in demand for the precious metal and thus a structural surplus in the market.
Platinum price is on a downward trend
Platinum is mainly used to make catalytic converters in cars, because this precious metal can greatly reduce the emission of harmful exhaust gases from an internal combustion engine due to its unique properties. repulse.
According to Figures Johnson Matthey's account for more than half of the annual demand for this precious metal is accounted for by the automotive industry. In addition, the precious metal is also widely used for other industrial applications and for making jewelry. Investment demand has fluctuated greatly over the years, fluctuating between 5 and 10 percent of total global demand for the precious metal in recent years.
Global demand for platinum (Source: Johnson Matthey)
The question of what the platinum price will do in the longer term will therefore be determined to a large extent by the global demand for diesel engines. Several countries already have the ambition to outspoken to stop producing cars with a diesel engine from 2040 (or even earlier). Also, several car manufacturers have indicated that they want to stop producing these types of cars in the future.
The big question is whether it will all go that fast. The alternative of the electric car is still unaffordable for many people at the moment, especially without government subsidies. There are also many other applications for which diesel engines are indispensable for the time being, for example in the transport sector.
According to analyst Jeffrey Christian, investors are currently getting too far ahead of the music when it comes to platinum. They look too much at the sales figures of diesel cars and do not take sufficient account of the fact that diesel engines are also used in other vehicles and machines.
"Investors think that the demand for platinum from the automotive industry will disappear immediately, but that is not the case. The precious metal will still be needed in the coming decades, but that message is not getting across.
If you look at the use of platinum in catalytic converters for diesels, that demand is actually quite strong. But this message does not resonate with investors, who only look at the global figures. They see a 37 to 44 percent drop in market share in passenger cars and just extrapolate that."
Jeffrey Christian notes that in the shipping sector, for example, there is still a lot to be gained from cleaner diesel engines. According to him, many more catalysts can be built in this market segment in which platinum is processed.
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Disclaimer: Holland Gold does not provide investment advice and this article should not be read as such. Investing involves risk, and past performance is no guarantee of future results.
