At the beginning of this year investors were optimistic about platinum price increases, but have suffered some disappointment lately. August of 2011 saw the white metal trading at over $1,900 per troy ounce, but it has since dropped below $1,500. Many analysts were expecting strong automobile demand from China and other emerging countries to help push the platinum price higher – the automobile industry absorbs about a 60% of yearly platinum supply for use in the construction of catalyst systems. The jewellery industry is the second largest end user.
But in Q1 half of all European Union members slipped back into recession, while growth in China and America is also slowing. China's booming automobile market contributed greatly to platinum and palladium's recoveries following their price crashes in 2008. Slackening economic growth in Brazil has also emphasised that for the moment at least, emerging markets remain highly sensitive to economic events in the developed world.
Johnson Matthey expects a 400,000+ ounce supply surplus in the platinum market this year (similar to last year). During 2011 platinum investment demand dropped by 460,000 ounces (approximately 30%) – largely as a result of sales of platinum exchange-traded fund shares during Q4.
However, during Q1 of 2012 investment demand recovered by 63,000 troy ounces, fanning hopes that the platinum price could soon start to make up ground lost since last summer, as investors start to appreciate that platinum – in common with all other precious metals – is a tangible asset that offers security during times of economic and political uncertainty.
