For investors looking to gain exposure to precious metals and resurgent mining companies, all that glitters is not gold. In fact, demand growth combined with shrinking supplies and regional conflicts are making platinum and its sister metal palladium shine brighter.
First a quick primer: platinum and palladium are “sister” elements in the platinum Group Metals (PGM) family. Platinum famously is an upgrade to gold in jewelry, while palladium is used as an alloy to make white gold. Both metals are essential in industrial manufacturing — particularly in the automotive industry. The market for palladium in China is particularly robust.
Strengthening industrial demand for the metals is combining with Russia’s Ukraine crisis and an ongoing miners’ strike in South Africa to create a perfect storm. Russia is the world’s largest producer of palladium and additional economic sanctions could impact exports. In South Africa, the world’s second-largest producer, miners have been on strike for 14 weeks and the action already has had an impact on supply.
In a report out this week, FastMarkets’ analysts revised estimates, forecasting platinum to trade from $1,350-$1,650 an ounce this year, up from $1,280 to $1,650; palladium prices should move between $700 and $$900 an ounce, up from $660 to $862. The higher prices will be supported by growth in global vehicle sales and supply disruptions, the researchers said.
Given the importance of the two white metals to jewelry and industries like automotive, here are three ways to play the likely lower supply of — and higher demand for — platinum and palladium: