London Platinum Week 2017 in Review

London Platinum Week 2017 in Review

It’s been all week here in London at the 2017 Platinum Week, arranged by the London Platinum and Palladium Market (LPPM). We attended the Bloomberg Intelligence Precious Metals Seminar and here are some of the key insights we’d like to share with you about the current trends in the platinum and gold markets.

 

Platinum

During the discussions on global trends in the platinum market, we had the pleasure of hearing Mr Chris Griffith, CEO of Anglo American Platinum and one of the busiest experts in the industry, speak about his views on the platinum market.

 

Key insights from Mr Chris Griffith:

  • With the surprisingly low price of platinum, 60% of the mining industry is making a loss. Currently, It is the capital markets incentivising the mining companies to continue production.
  • However, there is high optimism for the growing demand of platinum due to:
    • The introduction of platinum jewellery in India and China
    • Development in research, mostly with fuel cells, which will be used more massively in China, and in other countries utilising heavy duty diesel engines.
    • The creation of demand for platinum as an investment vehicle – mostly due to intense work done by the World Platinum Investment Council.
    • More mines are expected to close down, thus reducing supply even more.

 

There was also crucial insights given by Mr Trevor Raymond, Director of Research in the World Platinum Investment Council:

  • WPIC believes the game-changing C40 initiative, led by the Mayors of Paris and London, is likely to change automaker behaviour, with platinum being an integral part of the solution that automakers turn to in 2017 and beyond.
  • Global platinum ETF holdings grew by 65 koz in the first quarter of 2017, with increases observed across most regions. ETF assets in the quarter were at their highest level since the fourth quarter of 2015.
  • Bar and coin demand in the first three months of 2017 were supported by the minting of 20,000 one-ounce US American Eagle bullion coins, which sold out within three days in January
  • The Royal Mint is to launch its first platinum bullion coin and bar products, with more retail platinum products to follow later this year.

 

Gold

On the topic of gold, Mr Albert Chang, the CEO of the Singapore Bullion Market Association, spoke to us via video conference from the Bloomberg offices in Singapore, and made the following comments:

  • The demand for physical gold in India and China is quite flat, although volumes are still high.
  • Asked where the new “frontier” for gold is, Mr Chang mentioned the developments in ASEAN countries:
    • On one hand we are expected to see growing supply from these countries
    • On the other hand, we already see growing demand, which will slowly rise to single and double digit figures in tonnage. Mr Chang predicted that within 5 years, the demand from ASEAN countries will total 600-700 tonnes.
  • A second important development in the market is the growing number of online solutions both in the wholesale and the retail market globally.
  • Answering a question on the relationship between cryptocurrencies and gold, Mr Chang mentioned that he is a fundamentalist, and that he believes that gold is a vehicle for protection of wealth and a store of value, and that there are better ways to transact on a daily basis other than a gold backed cryptocurrency.

 

Experts from Goldman Sachs, Standard Chartered and Macquarie who participated in the Gold Panel concurred with Mr Chang that cryptocurrencies are a hot topic, but they were all skeptical.

There was a consensus that the headwinds for gold are there, even if currently they are not very strong. They emphasised that the price of gold will be subject to developments in the U.S., mostly in terms of growth data and in the American equities markets.

 

Overview

The insights from the London Platinum Week provide us with valuable information regarding the current trends in both the platinum and gold markets. While there is concern for the demand of both precious metals, there was an overriding sense of optimism that both metals will see increasing demand and growth, largely depending on trends in the Asian markets; in particular the demand for platinum in China and India, and the demand for gold in ASEAN nations.

J.Rotbart & Co