As the recent rally in the price of gold and silver seems to be losing steam, the price of platinum group metals, such as platinum has kept rising steadily. This has aroused investor interest in this group of metals, and some are wondering whether the rally will last.
To be fair, platinum prices have risen steadily over the past few months with a few minor dips in between periods of upward movement, but a recent steep climb this week saw the metal reach at least $1,600 on spot markets of the metal. Bloomberg News attributed this sharp rise to a policy shift in China that triggered massive purchases of platinum in the country.
According to the report, Beijing ended a tax exemption that had been granted to a government-owned entity that is a dominant player in the export of platinum. That policy change takes effect on November 1. The implication of this shift is that any platinum that is imported prior to that date can eventually be resold at a large profit. This could partially explain the sudden jump in prices on the international market.
However, not everyone is buying this explanation. Peter Major, a mining expert, points out that PGMs have seen their prices increase over several months, and that rally cannot retroactively be attributed to a policy decision that has just been made in China. He goes further to explain that during a recent meeting of platinum producers that was hosted in Johannesburg, South Africa, the three largest producers of the metal struggled to explain the forces behind the rise of prices in recent months.
Major adds that the producers revealed that despite the price slump that lasted nearly a decade, the extractors were bringing to market the same amount of platinum as they have been doing for nearly two decades. They were therefore unsure what exactly was behind the rally witnessed over the past three months.
Some went as far as speculating that investors may have wondered why gold had risen steadily and crossed the $4,000 mark while platinum was trading at a quarter of that price, and this could have caused many investors to speculate that platinum was also bound to rise, so they entered the market and that could have fueled the price increases.
Despite the producers being unsure what was driving the surge in prices of not only platinum but also other PGMs like rhodium, they were unanimous in their pleasure that prices have finally moved the metal “from the muck.” You can bet that other companies like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) that produce platinum aren’t complaining either!
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