Platinum is up 7% since I wrote about why platinum prices have performed poorly over the past five years. In the article which you can read here, I revealed a catalyst that could contribute to its price reversal and it appears this could be one of the three contributing reasons to platinum’s recent rise.
Here’s what I’m talking about…
#1 Russia keen to stockpile platinum
Probably, the biggest and most interesting development comes from Russia.
According to a report released by Interfax and cited by Bloomberg, Russia’s Draft Federal Budget outlined plans to significantly bolster its precious metal holdings in over the coming years. Already, I’ve seen reports that Russia will spend +$500 million in 2025 alone.
Now, Russia has always been a huge gold buyer. But this report also included platinum, palladium and silver.
While details such as volumes and amounts for each metal are scarce, it’s still a huge deal. And I suspect this buying spree relates to Russia’s (including BRICS+) plan of creating an alternative financial system to protect their economies against Western sanctions.
Platinum is already in short supply. As I mentioned in my previous article…
According to the World Platinum Council, platinum’s supply deficit is forecasted to increase from 731,000oz to over 1 million in 2024 – the largest annual deficit in a decade.
Imagine what would happen to the deficit if BRICS+ nation start stockpiling platinum as well.
#2 Platinum futures to make their debut in China?
Following on from Russia’s development, there were reports that China will launch platinum/palladium futures using the Guangzhou Futures Exchange (GFEX).
Launched in April 2021, the GFEX forms part of China’s “Belt and Road” initiative.
The aim of the exchange is to establish a futures market serving the real economy and green development. For example, in 2023, China launched lithium carbonate futures. This allowed participants to hedge lithium’s price volatility.
GFEX will be the first exchange to allow delivery against its contracts of platinum and palladium used by the main consumers, automakers and other industrial sectors. The contracts also aim to support Chinese platinum investment demand, which has plummeted 79% since 2014.
Offering Chinese jewellers and manufacturers a domestic hedging mechanism could lead to stable pricing and in turn, reduce the risk associated with platinum jewellery production and sales. Competitive pricing could ultimately reignite consumer interest in platinum.
According to a Reuters report, the GFEX is expected to launch these contracts in the first quarter of 2025. Again, this move could worsen the platinum supply deficit. And that’s a recipe for higher prices.
#3. Look at who’s bullish on Platinum now
One of the best ways to gauge interest in platinum – particularly platinum stocks – is by looking at fund manager’s allocations.
Unfortunately, the downturn in the platinum market scared big money managers away. But this could be starting to change…
Just read Coronation’s recent note,
It’s amazing how sentiments can change in such a short period. But the good news for Platinum miners is fund manager’s allocations are still small. Once the rest catch onto platinum’s potential, we could see a flood of money flowing into platinum miners.
So, if you have a little contrarian spirit, you might be handsomely rewarded for taking a punt on platinum stocks now. If you’re interested in commodities and in particular critical resources necessary for the future of AI, renewable energy and EV’s then make sure you get our exclusive South African Investor critical resources report. If you sign up today you can get it as a free thank you bonus. Go here to learn more.
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