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Bloomberg
After lagging behind other precious metals in 2017, platinum is finally outperforming, and hedge funds are taking notice.
Money managers increased their bets on a rally for platinum, a commodity used in pollution-control devices for cars. Investors had been pessimistic on prices until the start of this year, but that sentiment changed as signs of synchronised global growth boosted expectations for demand.
The metal’s strong correlation to gold is also providing support as a weaker dollar propels alternative assets higher. While platinum rose in 2017, it was a lackluster performance compared with gold, silver and palladium. After Volkswagen admitted falsifying pollution data for its cars in 2015, the outlook for platinum had dimmed as purchases of diesel-fueled vehicles fell in Europe. Now, things are turning around as China starts implementing stricter emissions standards, fuelling increased demand for the metal.
Precious metals have continued to climb even after the Federal
Reserve raised borrowing costs in December for the third time in 2017 as traders sought a store of value. The dollar is trading near a three-year low.
“There has been a change in sentiment in platinum,†said Maxwell Gold, a director of investment strategy at ETF Securities. “With the price rebound since the Fed raised rates in 2017, platinum is beginning to catch up to palladium and gold.†Money managers raised their net-long position, or the difference between bets on a price increase and wagers on a decline, by 79 percent to 19,806 futures and options, according to US Commodity Futures Trading Commission data.
Platinum futures have climbed 8.7 percent in January to $1,020.10 an ounce on the Comex in New York. That compares with this month’s 3.5 percent gain for palladium, 1.8 percent for gold and a 0.6 percent slide for silver.
Tighter emission standards in China include lower pollution limits set this year for all diesel vehicles, which will mean higher use of platinum catalytic converters to meet the requirements, Gold said.
As consumption is poised to rise, stockpiles in warehouses tracked by the New York Mercantile Exchange have shrunk to the lowest since 2016.
This year, supply will probably outpacing demand by 275,000 ounces, as jewellery and industrial uses climb, according to the World Platinum Investment Council.