Independent precious metals research consultancy GFMS reports that the company’s predicted platinum price of $1 900/oz is a base case scenario, with US monetary policies holding the possibility of providing the industry with the shoot-up potential needed to once again push the platinum price to over $2 000/oz.

GFMS CEO Dr Paul Walker explains, should the US show no interest in dealing with its current financial situation and con- tinue with low interest rates, and go ahead with the third round of quantitative easing, then the upside potential for precious metals markets, not only platinum, is infinite.

“Should the US go ahead with what they have been doing . . . [since the] global financial crisis, then the gold price could easily peak at between $1 800/oz and $1 900/oz. “Should this happen, then platinum will once again peak at over $2 000/oz,” says Walker.

This then is an illustration of what Walker describes as the perfect safe haven asset and is an indication of why the world is turning to gold and platinum as investment tools, as opposed to the US dollar.

He adds that the same macroeconomic drivers that will see the gold price peak at $1 600/oz by the end of the year are driving the platinum price.

Walker points out that, once again, the platinum industry is in a gross surplus and adds that the fact that this has been a feature of the industry for a number of years indicates the tough economic climate that the world is faced with.

“This has been characterised by decreased industrial activity since 2009 and a period of sustained global growth. “The factors that contributed to the surplus are the sharp recovery in autocatalyst recycling, increased amounts of jewellery scrap hitting the market and South Africa producing the goods with regard to mine production,” says Walker.

He adds much of the same is expected from South Africa on the production front but warns of the potential of the looming downside factors that could affect the market.

“Yes, people are voting with their feet and investing in platinum while South African production is up. “However, there are significant concerns over the sustainability of increased South African production. “These are characterised by mine safety issues, Eskom’s load-shedding plans, political risk – which, in itself, is driven by calls for nationalisation – and the fact that producers are continuously under pressure to contain costs,” says Walker.

This sustained period of an industry surplus saw a 2010 oversupply deferential of 962 000 oz, which will continue for at least another five years.

“There is an uphill battle on the demand side for platinum. “Although the long-term outlook is bleak, there are some bright immediate horizons. US and European environmental agencies are pushing for heavy-duty diesel engines in the road freight industry, which will play a significant role in the platinum industry should it be passed,” says Walker.

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