Is your jewelry investment skyrocketing? Why platinum and palladium prices are on the rise!

The prices of platinum and palladium, two crucial precious metals, have been on the rise due to various supply and demand dynamics. South Africa, the leading producer of these metals, has experienced significant supply disruptions, including job cuts and mine closures. This blog post delves into the factors driving the prices of platinum and palladium, including supply deficits, economic conditions, and industrial demand, and provides insights into future market forecasts.

Supply Challenges and Market Dynamics

South Africa’s Supply Deficits

South Africa’s mining sector has faced numerous challenges, leading to a reduction in the supply of platinum and palladium. The country, which is the top producer of these metals, has seen a decline in output due to mine closures and job cuts. Palladium supplies, in particular, have dropped significantly over the past few years, especially between 2019 and 2020, when supply decreased at a faster rate than demand.

Impact of Supply Deficits on Prices

The supply deficits in South Africa have had a direct impact on the prices of platinum and palladium. With reduced output, the availability of these metals in the market has decreased, leading to higher prices. The World Platinum Investment Council (WPIC) has projected platinum deficits from 2023 to at least 2028. The WPIC expects an average annual deficit of 500,000 ounces of platinum until 2028, which will reduce above-ground stocks to six weeks of demand by the end of 2028, down from 23 weeks at the end of 2023.

Demand Factors Influencing Prices

Automotive Industry

The primary use of palladium is in the automotive industry, where it is a critical component of catalytic converters used to clean exhaust fumes. The auto sector accounts for approximately 80% of palladium offtake and around 40% of platinum demand. Currently, the automotive industry consumes 3.3 million ounces of platinum annually. As the demand for vehicles continues, the need for these metals remains robust, supporting their prices.

Jewelry Industry

Palladium is also highly valued in the jewelry industry, particularly for its color and fineness, which make it a popular choice for watches and rings. The continued demand from the jewelry sector further supports the prices of palladium and platinum. If these industries maintain their demand, production levels should increase, potentially stabilizing or reducing prices. Conversely, a decline in demand could lead to higher prices due to scarcity.

Economic Conditions and Geopolitical Events

Influence on Platinum Prices

The prices of platinum are also influenced by broader economic conditions and geopolitical events. Economic downturns or instability can lead to fluctuations in industrial and investment demand for platinum. Additionally, geopolitical events, such as trade tensions or sanctions, can impact the supply chain and availability of these metals, further affecting their prices.

Future Market Forecasts

Platinum Price Outlook

Analysts are optimistic about the future of platinum prices, supported by declining output from mines and sustained demand from the automotive sector. Macquarie’s five-year outlook predicts that platinum prices will rise to $1,250 an ounce by 2028, representing a 29% increase from 2023 levels. The WPIC’s forecast of continued supply deficits adds to the bullish sentiment for platinum prices.

Palladium Price Outlook

In contrast, palladium is expected to transition to a surplus from 2025 onwards. Macquarie forecasts a significant decline in palladium prices, with average prices falling by 40% from 2023 levels to $800 per ounce by 2028. This anticipated surplus in supply, coupled with potentially reduced demand from the automotive industry as electric vehicles become more prevalent, contributes to the bearish outlook for palladium prices.

Sprott Physical Platinum And Palladium (SPPP) Technical Analysis

Volume:

• Recent Volume: 840,200
• Volume has shown a significant increase recently, indicating higher trading interest and possibly stronger momentum.

Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI):

• RSI Value: 71.18
• The RSI is above 70, which typically indicates that the stock is overbought and may be due for a pullback.

On-Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV):

• OBV Value: 3,781,202
• The OBV is trending upwards, suggesting that volume is increasing on up days, a bullish signal.

Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More:

• Stochastic RSI Value: 1.000
• The Stochastic RSI is at its maximum value, reinforcing the indication from the RSI that the stock is overbought.

Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More (ADX):

• ADX Value: 17.82
• An ADX below 20 typically suggests a weak trend. Despite recent price movements, the overall trend strength is still weak.

Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More:

• Chaikin Oscillator Value: 417,332
• A rising Chaikin Oscillator suggests accumulation and buying pressure.

Analysis Summary:

• Price Movement: The stock has recently broken above its 200-day moving average, which is a bullish sign. However, it is important to note that the current price is significantly above the 50-day moving average, which may suggest a potential overextension.
• Volume: The surge in volume supports the bullish price movement, indicating strong market participation.
• Momentum Indicators: Both RSI and Stochastic RSI suggest the stock is overbought. Traders might want to be cautious of a possible correction.
• Trend Strength: The ADX indicates that the trend strength is still weak despite the recent price increases. This could imply that the recent upward movement may not be sustainable without stronger trend confirmation.
• Buying Pressure: The Chaikin Oscillator’s positive reading suggests there is buying pressure in the market.

While the stock shows strong short-term bullish signals, the overbought indicators and weak trend strength caution against potential corrections. Traders should monitor for consolidation or pullbacks before entering new positions. Long-term investors should consider the broader market conditions and fundamental factors influencing the stock.

Past performance is not an indication of future results. Do not forget to do your own research and remember that the information provided is for informational purposes and cannot be taken as investment advice.

Looking Ahead

The rising prices of platinum and palladium are driven by a combination of supply deficits, robust industrial demand, and economic factors. South Africa’s challenges in maintaining output have significantly impacted the availability of these metals, leading to higher prices. While platinum is expected to experience continued deficits and price increases, palladium is forecasted to move into surplus, resulting in lower prices in the coming years. Investors and industry stakeholders should closely monitor these dynamics to navigate the evolving market landscape effectively.

Frequently Asked Questions (FAQs)

Book Recommendations:

1. “The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age” by David S. Abraham
   • Overview: This book explores the role of various rare metals, including platinum and palladium, in modern technology and industry. It discusses market trends, geopolitical issues, and the environmental impact of mining these metals.
2. “Gold, Platinum, Palladium, Silver & Other Jewelry Metals: How to Test, Select & Care for Them” by Rene Newman
   • Overview: While focused primarily on jewelry, this book provides valuable insights into the properties and market trends of precious metals like platinum and palladium. It includes historical pricing data and investment advice.
3. “Precious Metals Investing For Dummies” by Paul Mladjenovic
   • Overview: This book covers a wide range of precious metals, including platinum and palladium, offering advice on investing in these metals. It includes historical price trends and market analysis.
4. “The New Gold Rush: The Riches of Space Beckon!” by Joseph N. Pelton
   • Overview: Though focused on space mining, this book discusses the future of precious metals, including platinum and palladium, and how new sources could impact market trends and prices.
5. “The Complete Guide to Precious Metals: The Conservative Investor’s Guide to Gold, Silver, Platinum, and Palladium” by Jason Hamlin
   • Overview: This comprehensive guide provides an in-depth look at the investment potential of precious metals, including detailed sections on platinum and palladium. It covers historical prices, market trends, and investment strategies.