What is Driving the Surge in Platinum Prices?

Platinum prices surged on Wednesday to their highest level in six years, with increased demand from investors driving the surge in the precious metal futures.

According to market experts, platinum is attracting more investments now as it nears its third year in a row with a global supply deficit.

In addition, the recovery of the auto industry is set to increase demand for platinum, especially after data showed the tenth consecutive monthly rise in car sales in China, which rose by 30% on an annual basis to 2.5 million cars, Dow Jones’s MarketWatch reported.

The recovery of the global economy is set to drive more demand for platinum, especially from the auto industry, with supply most likely to remain short.

In addition, environmental policies and higher restrictions on emissions from various vehicles are expected to further enhance the auto industry’s demand for the metal.

Both platinum and palladium are used in the manufacturing of catalytic converters that filter and clean car exhaust fumes, a recent report by Reuters explained.

Today, platinum futures for March delivery gained an astonishing $52.50, or 4.4%, to close at the level of $1,246.9 per ounce.

This is the highest closing platinum’s most active contracts since February 2015.

The global platinum market witnessed a supply deficit of 390,000 ounces last year, and with demand expected to increase as previously explained, the deficit is likely to continue, which could likely help drive prices higher, spurring more demand from investors.

It is worth noting that rising demand for platinum, and to some extent palladium, come after the recent volatility in silver trading.

Last week, silver futures closed in gains, following a turbulent week for the metal that began with silver futures rising to their highest level since 2013, before dropping by more than 10% mid-week.

The surge in silver futures was mostly attributed to increased demand from the trading frenzy that started for some Wall Street small stocks on the social media platform Reddit, which also led to historic rises for stocks such as GameStop and AMC Entertainment.