Platinum and palladium to top the charts again

Global – Platinum and palladium will be the best performing precious metals next year as record global car sales keep them in short supply for a third successive year.

Platinum will gain 13% to average US$ 1.635 an ounce by the fourth quarter of 2014, taking the mean of eight estimates collated by Johnson Matthey and analysts at Barclays. Palladium will gain 10% to average US$ 823 an ounce, the most for any quarter since 2001. This is in stark contrast to gold and silver, which have slumped by 20% and 25% respectively because of lack of demand and investor interest.

‘Platinum and palladium markets show the tightest supply and demand among precious metals and probably will throughout next year as well. Industrial demand should stay high,’ observed Daniel Briesemann, an analyst from Germany’s Commerzbank.

The trend can be partly explained by the projected growth in car sales, expected to accelerate to 4.8% in 2014 from 2.7% this year. Such an increase would mean that sales of cars and light commercial vehicles reach 83.2 million this year and 87.2 million in 2014 – at a time when metal stockpiles are contracting as mining companies fail to keep pace with demand.

So far this year, palladium has risen 6% to US$ 746.10 in London while platinum has fallen 6.1% to US$ 1,445.60. Meanwhile, holdings in exchange-traded products backed by platinum reached a record 73.3 tonnes valued at US$ 3.4 billion last Friday, 18 October. The amount of metal bought through palladium ETPs increased 16% to 67.7 tonnes valued at US$ 1.63 billion.

Given this background, Bloomberg expects an average price of US$ 1,500 this quarter for platinum, with palladium averaging US$ 750.