The Strategist

Investors are stocking up on platinum in anticipation of price growth

09/11/2020 - 03:04

International investors are actively buying platinum: the total assets of all exchange-traded funds have risen to a new all-time high of 115.5 tons. In four months, the assets have grown by a quarter. Interest in the metal is going up amid its undervaluation compared to other precious metals, as well as the recovery of the auto industry in China. Analysts expect the trend to continue and metal prices - to return to $ 1100-1200 per ounce.

Against the background of declining investor interest in exchange-traded funds investing in gold and silver, there is a surge in demand for platinum funds. According to the latest data from Bloomberg, at the end of trading on Wednesday, the assets of platinum funds exceeded 115 tons, the new all-time high. During the month, the assets of the funds increased by 7.6 tons. The strong growth in assets continues for the fourth month in a row, and during this time they have risen by more than 21 tons - the strongest growth in such a period of time in the history of tracking data from Bloomberg since 2007.

Previously, such a high interest was shown in gold and silver funds. In March-July, their assets grew monthly by 3–6% and by 3–10%, respectively. However, in August, growth slowed sharply: since the beginning of the month, it was less than 1.5% for gold funds and less than 1% for silver funds. However, the total assets of the funds continue to renew their historical highs, reaching 3.4 thousand tons. The assets of the Silver Fund in early September fell to 24.4 thousand tons.

The inflow of investments in platinum is driven by its undervaluation compared to other precious metals, the value of which has risen sharply this year. According to Reuters, since the beginning of the year, gold has risen in price by almost 30%, and at the beginning of August its value reached a historical maximum: $ 2072 per troy ounce. During the same time, silver has risen in price by more than 50%, reaching $ 30 per ounce in August. Platinum, which is also inferior in liquidity to gold, showed only 20% growth over the two summer months, to $ 1000 per ounce, the maximum of the second decade of February. During the week, the price of the metal was at around $ 940 per troy ounce, which is 2.3% below the values of the beginning of the year.

Investors' hopes for the recovery of the auto industry, a key consumer of the metal, add to the attractiveness of the platinum investment. Auto sales rose 11.6% in August to 2.19 million, according to statistics from the China Association of Automobile Manufacturers released on Thursday.


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