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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Market Insiders Baffled By Low Platinum Prices

Unexpected news in the platinum market this week. With key consumer Japan saying that it’s buying surged to a record in 2015.

Japan’s biggest bullion seller, Tanaka Kikinzoku Kogyo, reported that its platinum sales more than tripled during the past year. Rising to an all-time high of 537,946 ounces, from just 149,272 ounces in 2014.

That comes as platinum prices fell over 25 percent last year, this week hitting the lowest level since 2008 — at near $800 per ounce. Related: OPEC At Peak Production

The big jump in buying of course makes a lot of sense. At historically low prices, buyers should be enticed to snap up supply.

And this week one of the world’s biggest insiders in the platinum industry said they’re shocked that such discount buying isn’t happening more.

The group is Johnson Matthey, one of the foremost monitors of the global platinum market. With the group’s manager for market research, Peter Duncan, telling an investment industry conference Wednesday that something appears out of whack in the platinum market right now. Related: Will OPEC Be Forced To Call An Emergency Meeting Soon?

Duncan told conference attendees that Johnson Matthey sees the 2015 deficit in platinum supply and demand growing bigger than expected. With the group now pegging the supply shortfall for the last year at 702,000 ounces — up from a previous forecast of 652,000 ounces.

This comes as lower prices are causing a surge in investment demand, like that seen in Japan. And as recycling of the metal falls.

Duncan also noted that the deficit situation is likely to persist in 2016. Saying that the coming year will be the fifth year in a row that the platinum market runs a fundamental shortfall.

The most interesting point from Duncan’s talk was his thoughts on prices. Which he admitted are baffling the experts at Johnson Matthey right now. Related: Oil Prices Approach $26 After Bearish IEA Report

“We continue to be surprised by the lack of price response,” he said, referring to the fact that ongoing supply shortfalls should be lifting prices.

That suggests the fundamentals are setting up for a recovery in this market. Temporary price distortions do happen, but when supply exceeds demand there must eventually be a response.

Here’s to setting things straight

By Dave Forest

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