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Heraeus Precious Appraisal

  • Edition 31 - 07. September 2020

Chinese speculative buying leaves little upside for platinum in H2

Chinese jewellery fabricators tend to hold limited stock, but low prices have attracted additional demand. In the first half of the year, platinum purchases by jewellers on the Shanghai Gold Exchange increased modestly, making it the first yearon-year gain for H1 since 2015. Demand from industrial users and banks also jumped while the price was low and has since tailed off in line with higher prices. It is likely that purchasing by jewellery fabricators was speculative restocking incentivised by a low price more than a result of increased consumer demand. Jewellery retail sales started to improve in Q2 after plummeting in the first three months of the year, but jewellery is still the worst performing retail industry of the year to date. The surge of platinum buying while the price was low in March is likely to be enough to keep inventories topped up, even as demand improves in H2.

Platinum jewellery fabrication in China returned to positive growth in Q2, albeit by just 1% year-on-year, but a marked improvement from the -56% in Q1 (source: Platinum Guild International). Most retailers are seeing demand for platinum jewellery gradually return, with growing interest in new designs and collections moving into H2. As China’s economy rebounds, spending on platinum jewellery and other luxury items is expected to improve. However, platinum jewellery sales this year are still likely to be significantly down on 2019 levels, continuing the downward trend of previous years. In the medium term, platinum jewellery demand can recover some ground in China, as the economy continues to expand and consumers adjust to life after the pandemic.

Reduced jewellery demand and weak diesel vehicle sales owing to Covid-19 have led to considerable reductions in platinum demand this year and the market is forecast to remain oversupplied. Investment demand was able to balance the market last year but will need to improve significantly to offset the fundamental surplus forecast for 2020.

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