Platinum Saw Biggest Drop in Past 7 Years



Platinum has been lackluster

Most precious metals experienced a rout in July, so investors in these metals have ended the quarter with losses. Gold has fallen approximately 1.6% on a YTD (year-to-date) basis. Silver futures, however, have seen marginal gains of 0.36%. Platinum and palladium also fell by 16.8% and 14.6%, respectively. Most expert analysts have lowered their outlook for platinum prices next year, as the metal plunged 16% in the third quarter. This is the biggest quarterly drop platinum has seen in the last seven years. Platinum, which has averaged $1,093 year-to-date, is expected to average $1,080 an ounce in 2015. Thus, the metal is expected to slip further in the coming quarter. An average price for the fourth quarter can be expected around $998 an ounce.

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The Volkswagen scandal has caused platinum to be the worst-performing precious metal. Prior to the scandal, palladium was the worst performer among precious metals. However, palladium attained some buoyancy backed by the rising demand for gasoline-based cars that use palladium in their autocatalyst. Price forecasts for palladium have also fallen, though less severely.

Supply side

The platinum supply continues to remain plentiful even after the five-month-long strike faced by South African miners. Demand for platinum has also been lackluster with weakness seen in the Chinese platinum jewelry demand. Chinese platinum jewelry accounts for one-fifth of global consumption.

South African miners

The South African miners continue to be in a bind as a result of the workers’ strike to attain better wages. South African mining companies like Eldorado Gold (EGO), Sibanye Gold (SBGL), and AngloGold Ashanti (AU) have lost 47.6%, 17.2%, and 12.2%, respectively, on a YTD (year-to-date) basis. These three companies make up 10.8% of the VanEck Vectors Gold Miners ETF (GDX). The VanEck Vectors Junior Gold Miners (GDXJ) precious metal indicator has fallen 10.2% on the same basis.


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