After spending five weeks below the $800 level and threatening to reach the 2008 low at $745 an ounce, platinum has rebounded last week when it gained 3.9% and closed on Friday morning its discount to gold to a 6-month low at the level of $370 per ounce.
What Do Analyst Say About the Evolution of Platinum Prices?
Analysts, who believe that the price of platinum will rise, point out that historically over the past 25 years, platinum has traded at an average $160 premium to gold, which means it should currently be trading around $1,260 an ounce. To reach that level, the premium should make for a huge rally, around 50% from its current levels.
Platinum prices have been in a choppy downtrend since 2011, but some analysts feel the downtrend has finally reached a bottom, as they’ve seen short interest dropping significantly in the past week, which has led to gains for platinum. Open shorts fell by 2,642 contracts, or 5.1%, and this short covering has certainly given a boost to platinum in the past week.
Still, current positioning shows a tendency for a decrease in the prices as net length stands at -10,976 contracts, highlighting that there are still many shorts in the market. And despite the nearly nine-year low in prices there hasn’t been much evidence of dip-buying from investors.
What Has Influenced the Platinum’s Price Over the Last Period?
The fall in the sales of diesel engines that use platinum has been one of the factors influencing the platinum’s price over the last period. According to the European Automobile Manufacturers' Association (ACEA) sales of diesel engine vehicles dropped 16% in January-June compared with the same period of last year. Diesel engine sales in Europe have been falling ever since the 2015 Volkswagen scandal when the company cheated on diesel engine emission testing. The drop in diesel engines sales is likely to keep platinum supplies in surplus, potentially for years to come.
Sources: Fastmarkets.com, Bullionvault.com, Marketwatch.com
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