Industrial metals rose on expectations that the global economy will experience a swift recovery. Platinum was close to hitting a six-year high, while copper rose to an eight-year high, trading at its highest since 2013. The broad market optimism has triggered demand in metals and pushed their prices higher. Copper prices were high as traders were raising their bets that the global economy will recover after the pandemic. Copper sentiment was further supported by growing expectations that governments will invest big in green infrastructure projects, with President Biden promising to spend trillions on solar panels.
Copper prices surge
Traders were quick to buy copper owing to broader market optimism, expectations of higher inflation due to US stimulus, a weakening dollar, lower rates of coronavirus infections and very low stocks.Analysts noted that the belief that US stimulus is going to push inflation higher has had an impact on the markets which has been positive for commodities such as copper which are usually used to hedge against inflation.
There is a general optimism about the economy, as the quick and successful vaccination program in many countries such as the UK has helped to boost further hopes of a quick economic recovery. With the coronavirus increasingly under control and the number of cases falling globally, as well as a weakening US dollar, industrial metals have found support.It is interesting to point out that demand for copper is coming from China and the US for manufacturing and infrastructure spending, respectively.
Platinum prices have neared their highest level in six years, as concerns about inflation and an extensive rally in financial markets has helped push prices up, including those of stocks, oil, and bitcoin.Platinum futures have increased 14% in 2021 to $1,231.60 a troy ounce, much more than other precious metals. Since last year, platinum prices have more than doubled. Many have invested in platinum as it is seen as a store of value during periods where government spending is expected to lift inflation.
Viewed as a hedge against inflation, precious metals are often the choice of investors, especially cheaper ones such as platinum.Platinum’s surge is also partly due to investors who are investing in rising markets in order to increase gains.With more governments focusing on renewable energy, demand for platinum will increase as it is essential in the electrolysis process in the conversion of green hydrogen.
The increasing demand for platinum has outpaced supply and in 2020 there was a supply deficit of 390,000 ounces. 2021 will mark the third consecutive year of supply deficit and it is estimated that demand may outpace supply by about 240,000 ounces this year. Demand is also high from China, with 2.5 million cars being manufactured and car sales up 30% year on year. With emissions standards stricter and global auto sales rising – especially after the pandemic – the demand for platinum will remain strong. Autocatalyst maker Johnson Matthey said that demand for platinum is expected to continue, mostly driven by demand for heavy-duty Chinese vehicles.
Energy shutdowns in South Africa have also contributed to platinum’s rise, adding over $100 an ounce to platinum prices this week alone.While Wall Street generally expected the precious metals to continue to rise, there are analysts that have warned that the rally may soon be coming to a halt. JPMorgan Chase & Co. have said that the current China-driven rally and investment might be coming to an end. They are also cautious about the current optimism in relation to a global economic rebound, as this might take time, while more clarity is needed in regard to coronavirus relief packages and renewable energy projects.