Looking to the Futures

Platinum futures (/PL) are off by 9% from a recent high earlier this month. The peak of 1770 on October 17th was the highest price for platinum in over 12 years. At that peak it was up 88% on the year, and it’s now sitting on a 73% gain. Silver (/SI) has a similar story. While the contract is down 10% from the all-time high of 53.765 reached on October 16th, it is still 60% higher for the year. That performance makes these precious metals the top performers on the futures market this year, with palladium (/PA) and gold (/GC) in third and fourth place respectively. Performance for precious metals has been supported by demand from investment, jewelry and industrial applications, plus a weakening dollar ($DXY), down 9.5% for the year.

The World Platinum Investment Council reiterated its forecast for a deficit for the year in last month’s Platinum Quarterly. The expected deficit was lowered to 850,000 oz (850 koz) from 966 koz. The Council highlighted a reduction in industrial demand as the primary reason for the decrease in the deficit. The deficit would represent 10.9% of total global demand if realized. It would mark a third straight year of deficits. Over the last two years, above ground stocks have declined by 1680 koz or 31%. On the supply side, an 8% reduction in mine production (-123 koz) has been partially offset by a 12% increase in recycling (+44 koz). For the year, supply is expected to decline 3%.

The Silver Institute is also forecasting a deficit for 2025. That would mark a fifth consecutive year of supply deficits. The gap is expected to narrow by 21% versus last year. The deficit is expected to decrease to 117.6 million ounces (moz), less than half of the 2022 peak of 249 moz. Industrial demand is expected to be flat for the year while jewelry fabrication is expected to drop, partly due to the price increases already experienced this year. Coin and bar production is expected to recover from two years of declines.  Supply is set to increase by about 2%, thanks to increases in mine production focused in Mexico and Peru. Recycling is anticipated to be flat versus last year. Next year, mine production is expected to peak as several major mines in Mexico and Peru move past peak production. That is expected to be partially offset by increases in production from mines in Canada and the US, including production of byproduct silver from gold mines and base metals mines.

Looking at the year-to-date platinum futures chart, there was a mild rally to start the year, followed by consolidation. At the beginning of summer, the contract took off, rallying by nearly 30% in two months. That was followed by a selloff of about $200 and another consolidation. The recent rally and selloff is tracing a similar pattern. On the technical studies, the selloff over the past two weeks took the contract below the 9- and 20-day SMAs and recent low wicks crossed below the 50-day SMA. The rolling front-month RSI spent much of the summer over 70% in overbought territory. The rally from mid-September to mid-October also saw the RSI over 70. The MACD is negative but moving toward the midline.

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