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Optimism Driving HSBC’s Near- and Mid-Term Forecasts for Platinum

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Aug. 18 2020, Updated 9:28 a.m. ET

Palladium forecast reduced

Just as Citigroup foresees a deficit for the platinum group metals, other big banks such as HSBC also have a peculiar outlook. HSBC, however, is more optimistic for platinum in the near and medium terms. It forecast an average price of $1,195 per ounce in 2017. However, it was less bullish for palladium, lowering its previous predictions. James Steel, a senior analyst at HSBC, lowered the 2016 forecast for palladium to $590 from the previous estimate of $655.

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The reasons behind more bullishness for platinum are its investment demand and the supply crunch. The World Platinum Investment Council endorsed Japan’s physical platinum ETF in a bid to boost global platinum demand. HSBC is looking for platinum to average $1,005 per ounce in the current year.

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Platinum group funds

Platinum and palladium can also be compared through the performance of funds such as the ETFS Physical Platinum Shares (PPLT) and the ETFS Physical Palladium Shares (PALL). PPLT and PALL have risen by 22.9% and 14.9%, respectively, on a year-to-date basis.

The changes in the precious metals also closely reflect the changes in mining stocks such as AngloGold Ashanti (AU), Primero Mining (PPP), and Sibanye Gold (SBGL).

HSBC analyst predictions

James Steel stated, “Mine output gains of 2015 are unlikely to be repeated going forward for platinum as high production costs, restructuring and capex cuts by South African producers should, over time, reduce supply growth.”

Palladium has been a lagger in the current year, having rallied the least among the four precious metals. Palladium is mined largely as a by-product of nickel production in Russia and platinum production in South Africa. Thus, palladium output may be constrained by the limited production of these two primary metals.

In the final part of this series, we’ll use cross-commodity rates to compare platinum and palladium.

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