Platinum has been the best performing precious metal for the week, and is also close to reaching its best time of the year, as a result of the seasonal trend from mid-December and over the first couple of months of the following year, a pattern seen for the last 25 or so years. According to the World Platinum Investment council, demand is expected to surpass supply by the end of 2020 and throughout the new year. Platinum is also important for the growth of the hydrogen economy and demand could expand even further, posing plenty of opportunities for platinum buyers. In the meantime, there are possible trading risks to consider, including a strong USD and falling platinum demand.

Platinum rises as supply shrinks

Platinum was up 9.59% due to supply shortfalls, a waning demand for gold and expectations that the metal will have a central role in the hydrogen economy and for the global demand for renewable sources of energy.

Since the election of president-elect Joe Biden, the price of platinum went up as Biden promised to spend trillions of dollars on green energy. At the same time, it benefited from a falling gold as demand for the safe-haven asset was limited due to the positive news of a Covid-19 vaccine. The drop in gold has boosted investors’ interest in other metals such as platinum which show the potential to rise even further. Gold appears to be in the latter stages of its run, while platinum shows that it has potential to grow in the long term.

Platinum was one of the most expensive metals a decade ago as it was used in autocatalysts which filter emissions from car exhausts, but its high price led automakers to use cheaper alternatives such as palladium. The reduced demand from carmakers meant that there was a surplus of the metal which pushed its price down. The pandemic has unsettled the balance between supply and demand, as platinum is now expected to reach scarcity levels for the year.

Platinum: A Metal in Demand due to Covid-19

The pandemic has changed many things and unsettled demand and supply in platinum. While jewellers and carmakers were not so interested in the metal as in earlier years, Covid-19 has driven money to precious metals, with many investors turning to platinum.

At the same time, its supply was also hurt as lockdowns did not allow for its mining. Platinum is mined in South Africa, in Marikana, with the first platinum nuggets being discovered back in 1924. Anglo Platinum in South Africa is considered to be the world’s largest producer of platinum. This is why the World Platinum Investment Council, has predicted that demand for platinum would exceed supply this year by a record 1.2 million ounces. 7 million and 8 million ounces of platinum are used each year.

Platinum’s Role in Renewable Energy

Platinum plays an important role in renewable energy, especially in electrolysis (extracting hydrogen from water) and in the fuel cells that use it. The hydrogen economy refers to the use of hydrogen as a fuel for heat, hydrogen vehicles, energy storage, and transport of energy. The use of hydrogen promises to reduce fossil fuels and limiting global warming. Many countries including the European Union and China have pledged to reduced carbon emissions by 2050-2060 and are invested in hydrogen power.

Renewable-hydrogen technology generates gas from water and stores it in fuel cells to be used in homes and vehicles. The wider use of hydrogen technology in the near future will require increased quantities of platinum. The limited supply of platinum coupled with the possibility of hydrogen technology boosting demand for platinum, provide a bullish outlook for the precious metal for the coming years.

Investors will be interested to see what will happen to the precious metal and its role in hydrogen economy, but also whether automakers will return to platinum in the future, as the current prices are a strong incentive. This could also push demand for platinum higher.

DISCLAIMER:

This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication

The post Trading Platinum in 2020 appeared first on Complete Turnkey Introducing Brokers (IB) Solution at IronFX.

Joe Biden’s Solar Plans will Boost Silver Demand

A less well-known driver for silver, but posing significant potential for the precious metal, is its use in measures against global warming. Silver, which has enjoyed a six-year high due to growing demand as a safe haven and limited supply, may be poised for a big additional boost due to its use in solar panels.

Many analysts have underlined the potential demand for the precious metal as governments look to boost economic growth and control climate change by investing in clean-energy technologies. This has been the case with president-elect Joe Biden, who earlier this summer had outlined plans for a “carbon pollution-free power sector by 2035” which will involve the use of renewable wind, solar power and electricity storage. The movement towards renewable energy and carbon neutral sources such as sunlight means that the future demand for silver will increase, as an increasing number of solar photovoltaics are used.

With more than $50 billion of green stimulus having been approved by governments up to 2020, and with Biden’s energy plan yet to come, silver will potentially surge further. In fact, the use of silver in photovoltaics grew by 7% in 2019 and is expected to grow even further as more governments commit to use renewable energy sources to generate electricity.

Demand for silver has also been on the rise since March due to the coronavirus pandemic, which turned investors towards precious metals to hedge against economic uncertainty. Concerns about tight supply and mine-production, combined with rising industrial demand are boosting silver even further.
According to various financial analysts and investors, the wider use of solar power as outlined in Biden’s plan might potentially double silver’s price. But this will come at a later stage, if Biden’s plan gets official approval.

Fundamentals also Boost Silver

Precious metals such as gold and silver are a hedge against inflation, so if the markets are expecting disappointing data to force the Fed to take necessary action to increase inflation, then this will offer support to precious metals. Therefore, precious metals were boosted by dovish Fed, low real yields, and rising inflation expectations.

For example, on 16th December, US 10-year TIPS yields fell to -1.03% following the FOMC and driven by a further increase in inflation expectations, which continue to rise as Congress moves closer to a coronavirus stimulus deal. When real yields fall, precious metals become more attractive, when compared to treasuries.

Precious metals are also used to hedge against inflation, something which in turn has contributed to the rising interest in silver. CIBC bank has forecast that silver prices will reach $32 per ounce in 2021, before sliding to $31 per ounce in 2022 and $30 per ounce in 2023.

DISCLAIMER:

This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication

The post Silver to Rise on Improved Global Economic Prospects appeared first on Complete Turnkey Introducing Brokers (IB) Solution at IronFX.