UBS Maintains Cautiously Optimistic Outlook on Platinum
Investing.com — UBS Global Research has maintained a cautiously optimistic outlook on platinum, setting a target price of $1,100/oz by mid-2025 in a note dated Monday. The report indicates that despite challenging market conditions, there are factors that could support this price target over the next year.
Key Drivers
One primary driver is the anticipation that the U.S. Federal Reserve will soon begin an easing cycle. Lower interest rates are expected to support real assets, including platinum. Analysts note, “But we expect platinum to lag gold until lower rates support stronger industrial activity,” suggesting that platinum will benefit from economic shifts but may react slower than gold.
Risk Management for Investors
UBS continues to recommend that investors with a high-risk tolerance manage the downside price risks associated with platinum. The metal’s price is known for its volatility, and current market conditions advise caution, despite a modestly positive long-term outlook.
China’s Platinum Demand
China’s platinum imports have been strong, particularly in the first half of 2024, with over 59 metric tons imported, surpassing the previous record of 53 metric tons in 2021. However, June’s imports of 4.3 metric tons showed signs of weakness, indicating potential short-term fluctuations in demand.
As the world’s largest platinum consumer, China consumed 66.1 metric tons in 2023 and imported nearly 102 metric tons of platinum last year, suggesting some stockpiling. Despite this, demand has shifted. Traditionally, the jewelry sector had the highest demand for platinum, but over the last five years, demand in this sector has more than halved, with the glass industry now leading consumption.
This change reflects evolving consumer preferences and industrial needs, while the decline in jewelry demand is attributed to platinum’s drop in prestige as a jewelry material. According to Johnson Matthey (LON:JMAT), this decline is linked to poor price performance; platinum has not been priced higher than gold since 2015, and consumers in China now prefer gold jewelry.
Further compounding the challenges, there has been a reduction in car production this year compared to the last, which also weighs on platinum demand.
Given these challenges, UBS has revised its platinum price forecasts downward by USD 25/oz for December 2024 and March 2025.
Comments (0)