London: Platinum group metals are set to further outstrip gains in gold this year as expectations for a rise in car demand and concern over the supply outlook point to a tighter market balance for the autocatalyst materials.
Palladium has made particularly stellar gains—up 75% so far this year against platinum’s 48% and gold’s 20%—amid weak Russian supply and a relatively stronger outlook for the US than European car sales.
Prices of fellow platinum group metal rhodium have also risen 70% this year.
Hope for a sustained global economic recovery are placing the metals on a surer footing, should it materialize, analysts say.
“With industrial precious metals denominated in dollars, you cover all three bases —you can have an inflation hedge, a dollar risk (hedge) and you can get the benefit of recovering economic activity boosting prices as well,” said David Wilson, an analyst at Societe Generale.
Deutsche Bank AG expects platinum prices to average $1,394 (Rs65,239) in 2010, and sees palladium at an average $321, while JPMorgan Chase and Co.sees platinum at $1,338 in 2010 and palladium at $306, up from a forecast $250 for 2009.
Even though gold prices have hit historic highs, with a promising trajectory for next year, investors are starting to look more favourably at platinum. “Looking at the two relative to each other, I would say over the next year, platinum has a better outlook than gold,” said Nicholas Koutsoftas, a portfolio manager at GE Asset Management Inc.
Around half of all platinum and palladium produced each year is bought by the car industry for use in catalytic converters. A sharp drop in automotive demand knocked platinum group metals prices in 2008 as the onset of recession hit car buying.
On a global scale, palladium is set to benefit most from a demand recovery. The main market for palladium-heavy autocatalysts—chiefly used in petrol cars—is the US, so signs that the US may emerge more strongly from recession than Europe could be good news for the metal.
Julie Crust contributed to this story.