Page 20 - Bullion World Volume 4 Issue 11 November 2024
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Bullion World | Volume 4 | Issue 11 | November 2024
           B ullion  W orld |  V olume 4 | I ssue 11 | N o v ember  2024
           Can Platinum Market


           Deficits be Met by



           ETFs? Yes, But only


           at Much Higher Prices




           By the World Platinum Investment Council





           In our updated two-to-five-year platinum market outlook,   not price agnostic. By calculating the weighted average
           we expect platinum market deficits to average 769 koz   cost of metal held in ETFs, it is possible to estimate a
           from 2025f to 2028f. Drawing on above ground stocks   price threshold required for metal to be sold.
           (AGS) will be needed to supply the market, however,
           these are expected to be depleted during 2028f.    Palladium illustrates that the weighted average cost
           A common argument is that despite depleting AGS,   of ETF holdings is broadly the threshold at which ETF
           platinum prices will not respond to consecutive years   disposals occur in a market expecting consecutive
           of market deficits, since ETF disposals will fulfil metal   years of deficits. From 2015 to 2020, palladium prices
           shortfalls.                                        tripled, and ETF holdings declined from 3.0 Moz to
                                                              0.6 Moz. However, most disposals occurred after spot
           Platinum ETFs launched in 2007 and have accumulated   prices exceeded the weighted average cost of ETF
           around 3.2 Moz of physically backed holdings. This has   holdings (Fig. 2). Accordingly, unless the platinum price
           supported platinum demand, but vice versa, disposals   sustainably trends above US$1,100/oz, we do not
           would result in ETFs acting as a source of supply.   anticipate large outflows and believe market deficits will
           However, it is often ignored that platinum ETF demand   only be met through the depletion of AGS. This could be
           stems from investors seeking a return on capital via   compounded by the ongoing interest rate downcycle,
           platinum price appreciation. Hence, ETF disposals are   which improves the competitiveness of non-yielding
                                                              assets like commodity ETFs.


           Fig 1. Weighted average cost of platinum          Fig 2. Most palladium ETF disposals occurred only after
           ETF holdings is estimated at US$1,100/oz          the spot price exceeded the weighted average cost






                                                                                                                                   FOR OVER A CENTURY WE HAVE


                                                                                                                                   RESHAPED VALUE RESPONSIBLY








           Source: Bloomberg, WPIC Research                  Source: Bloomberg, WPIC research

           This article is an abstract from a WPIC Platinum Perspectives research report that was first published in full on 15
           October 2024.The opinions expressed in this report are those of the World Platinum Investment Council (WPIC) and
           are considered market commentary. They are not intended to act as investment recommendations. Full disclaimers
           are available on the WPIC website https://platinuminvestment.com/disclaimer.                                                                        www.randrefinery.com


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