My Prediction For 2018 — This Forgotten Metal Will Soar

It was a brutal six years for the mining industry. While some metals saw their prices rebound in 2017, others didn’t.

There is a formula for rising prices — demand must exceed supply. In some cases, like zinc, a lack of investment meant supply fell below demand. Copper, whose price rose 27% since early 2016, is another metal that will struggle to meet demand.

In 2018, a different metal’s price will begin its rise…

Platinum’s New Trend

Here’s a six-year price chart of platinum:

Despite a 6-year decline in the price of platinum, it wouldn’t surprise me to see platinum prices rise 25% next year. Here's why it will happen.

You can see the steady decline from 2011 to 2016. The price fell by more than half to January 2016. There was a brief rebound that year. Then the price collapsed to its lowest price in two years earlier this month.

The question is: Why do I think this trend will change in 2018?

The answer is simple … supply can’t keep up with demand. In 2017, the supply/demand number was almost even. According to the World Platinum Investment Council, 2017 will end with a small deficit, around 15,000 ounces.

However, that same group expects the gap to expand. In 2018, demand for platinum will rise 2% to 8 million ounces. Supply will fall by 1% to 7.75 million ounces. That means the deficit will be 250,000 ounces.

An Extreme Low for Platinum Prices

In the past, this kind of deficit was enough to draw platinum sellers out. However, the platinum price is sitting at an extreme low. Without a significant increase in price, there won’t be an incentive for sellers. That’s one reason I expect platinum prices to rise in 2018.

But there’s another reason … sentiment.

One of the reasons that copper prices rose so rapidly in 2017 was the idea that electric vehicles would spur demand. That’s right, the price of copper rose because of expected demand. On the opposite side of the coin, platinum prices fell because of a lack of expected demand.

Platinum’s main commercial use is in diesel catalytic converters. In the wake of the Volkswagen scandal, where the company admitted to faking diesel efficiency, the perception of diesel cars fell. And so did the perception of platinum.

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Michael Molman 11 months ago Contributor's comment

I agree that #platinum does present an interesting oppurtunity. I intend to watch for an actual uptrend before investing though.