Historically, platinum has invariably commanded higher prices than gold. This is mainly due to the scarcity of the raw material and the associated high production costs. Indeed, as recently as 2016, platinum mines produced less than 5% of the output from gold mines.

However, in recent times this situation has reversed and the platinum future has become uncertain. With a sharp decline in demand for platinum, and a consequent fall in its market price below that of gold.

60% of platinum demand comes from industry, in the main for use in catalytic converters to clean automobile emissions; unlike gold, which relies for only 10% of its demand on industrial usage, and therefore benefits from its greater versatility.

Platinum’s prime usage is in diesel vehicles, where there has been a marked decline since the 2015 Volkswagen emissions scandal. Coupled with ever-increasing environmental concerns regarding gasoline and diesel vehicles (UK, France, and China have announced the ban on their sales in the not too distant future) and the growth in hybrids and electrical cars, there will undoubtedly be both a decline in oil prices and consequent serious long-term implications for platinum.

In fact, platinum is even losing ground to palladium, another catalyst put in diesel engines. Over the past few years, technologies have been developed that allow for increased use of palladium because it has traditionally been cheaper than platinum. As a result, platinum demand for catalysts fell by 20% between 2007 and 2016; whilst demand for palladium jumped more than 50% during the same period.

Thus, in summary, environmental regulations, the recent electric vehicle boom, and new technologies almost certainly lead to poor long-term prognosis for the future of the platinum market.

Source : TOMIO SHIDA / Nikkei Asian Review