Introduction
Platinum merits fresh investor attention looking into 2024 given an advantageous confluence of supply and demand catalysts promising to drive prices higher after years of lackluster performance leaving the metal overlooked.
Unlike crowded trades in tech names, crypto or popular precious metals like gold and silver, platinum offers overlooked value with significant appreciation upside thanks to its quintessential role enabling emissions control standards through automotive catalytic converters. It promises one of the most compelling asymmetric opportunities available for investors searching beyond overvalued equities and bonds.
Let’s analyze the essential factors influencing platinum’s outlook over the next 12-24 months and how to best capitalize on the impending supply squeeze.
Surging Automotive Applications
While retail investors may associate platinum primarily with luxury jewelry and heirloom watches, over 35% of annual platinum demand comes from automotive manufacturers who rely critically upon platinum and its exceptional catalytic properties enabling chemical reactions inside a vehicle’s emissions control systems.
These catalytic converters mitigate toxic pollutants like nitrogen dioxide and carbon monoxide from entering the atmosphere through exhaust pipes. Both gasoline and diesel engines utilize platinum converters but their loadings and compositions differ depending on engine specifics.
According to SFA Oxford, an average gasoline vehicle requires between 2-7 grams of platinum in its catalytic system while diesel cars use 2-14 grams per vehicle. With global automotive units nearing 100 million produced annually, incremental demand of just 1 additional gram per vehicle would require 100 million more grams of platinum – equal to over 5% of annual global mining output (nearly 4 million ounces).
So with surging automotive demand forecasted, especially higher-margin luxury and hybrid electric vehicles in mature markets like China, Europe and North America, platinum appears essential to enabling stricter air quality standards.
Catalytic converter loadings often double or triple successive model years as regulations tighten. And while fully battery electric vehicles need no platinum, they comprise less than 5% of new sales presently. This makes platinum indispensable for emissions control across 95% of vehicles for years ahead until battery costs decrease further.
Restricted Mining Output
While automotive demand surges, platinum mining output remains largely stagnant with limited potential for supply increases any time soon. Over 80% of global platinum production comes from just two countries – South Africa and Russia facing currency, energy cost, infrastructure degradation, and social unrest challenges.
And few untapped large platinum deposits exist for easy new development. The multi-billion dollar capital spending and 5-10 year lead timing required prevents supply reacting nimbly when automotive and jewelry demand spikes eventually catch miners flat-footed after years of output discipline.
READ ALSO: Platinum Investment Guide for 2024
Rising Investment and Jewelry Interest
Beyond essential industrial usage, jewelry fabrication and net bullion investment drive over 60% of total platinum demand in a typical year. Thanks to rising emerging market incomes and affinity for precious metal jewelry in China, India and the Middle East, this fabrication demand trajectory skews higher despite temporary COVID demand declines.
And platinum’s true scarcity beyond both gold and silver makes it particularly coveted for silk road consumers in Asian markets over the coming decade.
Meanwhile Western investment demand via bullion coins, bars and exchange traded funds turns positive thanks to high inflation and currency debasement risks awakening investors to platinum’s deep value relative to the far more crowded gold and silver trades. Platinum often becomes the “gold nugget” discovery for investors who dig deeper.
All considered, both industrial and investment demand drivers for platinum accelerate into 2024 while mining supply inelasticity promises price upside reactions as deficits widen.
Key Platinum Investment Opportunities
If agreeable investing outlooks ahead for platinum thanks to chronic supply shortfalls emerging just as four demand catalysts compound, how best gain exposure?
Let’s examine tactics and preferred vehicles across accounts to benefit from platinum’s exceptional leverage to increasing automotive pollution standards and rising monetary debasement risks.
Physical Coins and Bars
Direct ownership of small platinum coins (Eagles, Maples) or popular 1oz+ platinum bars allows outright control without counterparty risks inherent with funds. Value density makes storage worthwhile. Sets foundation for 15% overall metals allocation limit before volatility & liquidation burdens.
Platinum ETFs
In tax advantaged IRA/401k accounts, platinum ETFs like PPLT offer efficient exposure tracking futures prices while storing unencumbered bullion. No hassles receiving/transporting physical platinum or verifying assays. Excellent strategic core holding carrying more upside torque than diversified gold proxies like GLD and IAU.
Platinum Miner Equities
Speculators comfortable with geopolitical and labor risks leverage upside via specialized South African mining equities Impala Platinum(IMPUY), Sibanye Stillwater (SBSW) and Northam Platinum (NMPNY). Proportional share price profits relative to platinum’s appreciation but introduces volatility from local operating challenges. Good optionality but requires advanced risk moderation techniques.
Platinum Futures Options
For the ultimate risk tolerant traders, CME platinum futures and options contracts allow inexpensive exposure to outsized yet highly variable price moves without physical delivery/storage burdens. Powerful directional surrogate but requires disciplined stop loss implementation and contract roll overs. Typically utilize long-dated call options paired with protective put insurance.
To Recap – Platinum Breakout Brewing
Given chronic platinum supply deficits colliding with unrelenting automotive, jewelry and bullion investment demand growth drivers through 2030, current platinum valuations around $900 seem far too discounted relative to upside potential and risks ahead across other crowded asset categories.
Whereas gold and silver face steady above ground inventory growth each year, far scarcer platinum relies upon depleted South African mines running low on easily extractable ores. This supply double bind promises to spark pricing instability on any asset allocation flows towards platinum as monetary insurance or green transition strategic commodity.
Astute investors enjoy a brief window to exploit today’s reasonable accumulation prices before market realization of long-term platinum supply shortages lights a bull run taking this overlooked precious metal drastically higher in 2024 as underinvestment consequences arrive. The obvious catalyst becomes global automakers panic stockpiling scarce platinum catalysts critical for their product roadmaps.
So against government ambition towards zero emission transportation built atop legacy internal combustion powertrains with surging catalytic load requirements, the essential platinum outlook trends strongly upwards on sustainability policy demands colliding with unreliable mining dynamics unable to painlessly expand output. Scarcity breeds investment value – best to exploit early.
In another related article, Why Smart Investors Are Investing in Platinum in 2024
