Looking to the Futures

Platinum futures (/PL) gained over $200 or 23% in nine trading days to start the month, peaking at $1,300.50 Thursday evening. The rally took the metal to the highest level in over four years. Silver (/SI) gained $4, "only" 12% in the first six trading days to top out at $37.03 on Monday, good for a thirteen-year high. Both metals are experiencing supply deficits while the dollar index ($DXY) is weakening.

The World Platinum Investment Council last month raised its forecast for the supply deficit for the year. The estimated annual deficit was increased from 848,000 ounces (848 koz) to 966 koz. That represents a third straight year of supply deficits and follows last year's 992 koz deficit. The deficit represents 12% of projected demand for the year. The WPIC report highlighted increased demand for jewelry in China as a factor. The total jewelry demand is expected to increase to 474 koz for the year, partly due to a rally in gold prices, making the less-precious metal an attractive alternative. While tariffs could increase prices on imported products containing platinum, such as catalytic converters, the metal's status as a critical strategic mineral means that imports of the metal itself (bars, ingots, etc.) are exempt from tariffs. Interestingly, the current front month contract (July 2025, /PLN25) is in backwardation with the spot price, trading at a discount of roughly 1%. The other contracts in the curve are in contango, as is normally the case for precious metals futures.

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.

While silver and platinum have both rallied recently, the most precious of the precious metals is relatively flat. Gold (/GC) is up less than 3% for the month. The relative underperformance has shifted the price ratios of gold to silver and platinum closer to their historical norms. The ratio with silver peaked at 106 in April, when gold reached an all-time high of $3,538.80. It now stands at 94. The gold : platinum ratio has also declined from an all-time high of 3.55 to 2.65.

Undergirding the performance of both platinum and silver is weakness in the dollar. The greenback is down 9.8% for the year and 1.6% for the month. It has fallen to the lowest in over three years. Concerns about tariffs currently set to start on June 9 have played a part. Divergences in inflation and central bank policy are also pushing the dollar down. The European Central Bank is transmitting signals that it may have reached the end of its easing cycle, while soft domestic inflation data has raised odds for a rate cut at the September Fed meeting to 3-to-1, with fifty basis points in rate cuts expected by the end of the year.