During early trading on Friday, platinum shattered its previous price record and climbed to $2,684 an ounce. This current surge has been fueled by a confluence of factors, chief of which is the ongoing geopolitical turmoil around the world.
The current rally of platinum comes in the wake of investor concerns about traditional United States assets, such as Treasuries and stocks, and the overall economic direction of the country. As investors have lost trust in these instruments, there has been a growing shift in which portfolio allocations have moved in favor of hard assets like gold, platinum and silver.
These changes in the way investors view the U.S. economy have happened at a time when there is increasing geopolitical volatility around the globe, further driving investor preference for assets that they see as reliable stores of value.
The rise in international friction, especially the increasingly aggressive economic policies of President Trump, has also driven investors to seek for alternative investments. The tariff threats issued by the U.S. president targeting European countries that don’t support his bid to annex Greenland are the latest salvo in the United States’ bid to use trade policy and tariffs as a weapon to compel other countries to toe the line preferred by Washington.
As the world was trying to come to grips with the uncertainties of U.S. trade policy, another factor arose to act as a tailwind for precious metals like platinum. The dollar index has trended downwards for a while and this has increased the appeal of precious metals priced in dollars since investors who transact in other currencies find it more affordable to convert their money into dollars in order to acquire gold, platinum and other precious metals denominated in the U.S. dollar.
The fundamentals of the precious metals’ market are also in favor of platinum gaining further ground on global markets. There has been a persistent supply deficit of the metal around the world, and the major producing countries (Russia and South Africa) aren’t ramping up production to meet market demand. This situation creates room for further price increases given the fact that industrial demand for platinum is rising in the automotive and renewable energy sectors.
As more investors add the precious metal to their portfolios, further strain is being exerted on the already insufficient supplies of platinum. Producers of this metal like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) are therefore positioned to see their revenues tick upwards over the coming months, and possibly years, unless there is a major shift in the current mix of factors that have supported platinum’s current price rally.
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