- No. 18 | 21st May 2024
Market Report
Learn more about all important trends in the precious metals markets in our market reports on a regular basis.
Platinum catches a tailwind from stronger rand
Platinum has rallied strongly in the last month. By the end of last week, the platinum price had broken out of its trading range of the last year. Starting from nearly $900/oz in late April, it reached a 12-month close of $1,077/oz. The platinum and palladium prices were almost equal but now platinum has regained its premium, with its price momentum aided by a sharp increase in European platinum ETF holdings.
A stronger rand has provided a tailwind. The turning point in the USD/ZAR exchange rate coincided precisely with the turning point in the platinum price on 25 April. The rand exchange rate has shifted rapidly in the last few weeks, moving from over 19 to ~18.2 per dollar. Historically, a stronger rand correlates well with appreciation in the dollar-denominated platinum price. This relationship has been stronger year-to-date than the average correlation over the last five years.
South Africa’s general election looks more likely to support the rand. The ruling ANC party is unlikely to maintain a majority in the upcoming election, meaning it will have to form a coalition to retain power. However, recent polls show a recovery in support for the governing party. This makes it less likely that the ANC will have to form a coalition with a more radical left-wing party – a result that could have been seen as unfavourable for business investment. Easing of this political risk is likely to have helped strengthen the rand and local assets, with the stock market close to an all-time high. At the same time, Eskom has implemented far fewer power cuts, which could also have boosted sentiment.
London Platinum Week tends to be platinum’s peak. Despite the presence of positive drivers, seasonality does not support a higher platinum price going into Q3’24. The price tends to reach annual highs in the second quarter, often occurring around the time of London Platinum Week. It may be the case that a more favourable election outcome in South Africa is now priced in to the rand, which could limit upside for both the rand and the platinum price.
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