Following Joe Biden’s win in the U.S presidential election, platinum might be set to trump gold going forward as the U.S. and other major economies shift their focus to clean energy and decarbonization.
Limited supply and increased investment demand due to the green hydrogen narrative could be a powerful catalyst for a secular bull market in platinum in 2021.
Platinum is one of the rarest precious metals in the world, 30 times rarer than gold, although it currently trades at half the price of gold. And yet, platinum has traditionally traded at a healthy premium to gold, as annual mine production is about 15–20 times scarcer than gold.
A stack of solid platinum ingots on an isolated dark background – 3D render
getty
President-elect Biden is expected to increasingly shift the U.S. from an economy reliant on fossil fuels to one driven by renewable-energy sources. In anticipation, many investors are already moving their assets away from fossil-fuel producers and toward companies operating in the renewable-energy industries.
The change in strategy comes against the post-Covid-19 backdrop which has seen hydrogen already gaining momentum as a source of sustainable energy across the globe. In July 2020, the European Union unveiled its new hydrogen strategy as part of its goal to achieve carbon neutrality and zero pollution economy by 2050. As the first phase, it will increase the current installation of clean energy electrolyzer capacity more than six-fold to 6 GW by 2024.
Europe is fully dependent on the supply of 19 of 29 raw materials relevant to fuel cells and electrolyzer technologies, therefore this provides a positive demand signal for several metals, most notably platinum.
According to IEA (International Energy Agency) data, South Africa and Russia are the two largest platinum producing countries in the world, accounting for 72% and 12.2%, respectively.
Diversification in investment is important, and that’s the same when it comes to hard assets like precious metals. As the old saying goes, the only free lunch in investing is diversification because it allows investors to reduce risk while possibly improving returns.
With this in mind, investors might want to consider the investment case for platinum as a way to diversify their portfolios by allocating some of their gold weightings to platinum going into next year.
It is significant to note that if investors in gold had included even a 5% allocation to platinum in their portfolios, their risk-adjusted returns would have been higher over the past 30 years.
Unprecedented monetary and global fiscal stimulus and the resultant debasement of nation state currencies has led to more investor interest in hard assets like precious metals.
The question on many precious metals investors hence is whether platinum prices could follow gold to new highs, especially if and when, platinum investment demand begins to focus and factor in the catalyst of low prices and rise in demand for green green hydrogen.
Historically, because platinum is rarer and more expensive to mine, according to Bloomberg data, platinum has tended to trade around 1.25 times the price of gold. Presently, however, the price of platinum is not even half the price of gold.
If we get a reversion to the mean, and gold stays at or above $2,000, then platinum prices could rally to $2,600–a more than doubling from today’s price of $877 per ounce of platinum. The current gold /platinum ratio stands at 2.15, while the all time low was 0.43, and the all time high was 2.30.
According to to C2ES–the Center for Climate and Energy Solutions–an independent, nonpartisan, nonprofit organization working to forge practical solutions to climate change, there is a climate case to be made for hydrogen to become the clean energy of the future.
Hydrogen has been touted as the answer to humanity’s energy needs. After all, it is the most abundant element and, when burned, releases only energy and water. It can be stored and transported in liquid or gaseous form, is energy dense, and is not subject to intermittent supply.
Continued proliferation of government sponsored hydrogen economy initiatives are expected to only add to platinum investment demand momentum.
What is still unappreciated by many global investors is that platinum, is a key material in many clean energy technologies and emissions control devices, according to the International Energy Agency
In a few years time we might hence expect it will look obvious that platinum was “too cheap”in November 2020. Platinum having lagged gold’s performance this year and trading on multi-year lows coupled with extreme readings in the gold/platinum ratio make platinum an interesting and potentially profitable investment.
Platinum has traditionally traded at a healthy premium to gold. There have only been four occasions during the last 40 years where platinum has been priced at a discount to gold for a sustained period. In all these cases, the price markedly recovered in the following years.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
