Many of the factors that have held back platinum in the past, including demand, liquidity in the futures markets, and visibility, are now becoming tailwinds for the price, said Trevor Raymond, director of research at the World Platinum Investment Council. Platinum has risen 13% since the start of 2021.
Platinum has had an extraordinary run over the last two months. Trevor Raven, director of research at the will platinum investment council is back to give us his take on why the price has run up and where the price is headed from here. Trevor. Welcome back. Have it. Thank you. Great to be back. It's a it's in two months since we spoke, you were last on an early December, December 4th was the last air date we had with you.
And the price of platinum has risen from around a thousand dollars to a max of $1,300. Now, today at city around 1,230. So as had a substantial run 20 to 30% over the last two months, which is a lot for any metal, particularly, particularly, um, Based slash precious metal. However you'd like to categorize it.
Can you explain the fundamentals behind this, this bolt? Sure. David, I think what we've seen over this period is just more visibility for platinum. And I think what underpins what's going on is really all about, uh, demand growth, uh, uh, constrained supply. And visibility. Um, so let me unpack that a little, I think visibility, what has happened during COVID is that the world has become more aware that the hydrogen economy is probably a certainty.
Uh, and we can explore some of the reasons why that a hundred and economy, uh, is lucky, most likely to happen. Uh, Catherine's very involved in both the production of green hydrogen, as well as using fuel cell vehicles. And then what you've got on, uh, supplier supplies, being constrained, uh, due to low prices over a decade and reinvestment in the main mining region of South Africa, and then demand growth.
You've got some significant demand growth at 10 years, which normally doesn't get investors too excited, but you've got substantial demand growth in the next few years from substitution by platinum or palladium. So I think this combination of demand growth and constrained supply together with the price moving is why we're seeing such significant interest in and the prostitute directory.
Yeah. Yeah. I have to draw parallels to other metals in particular like silver, for example, which is also a key component in the electrification of our economy, yet that, that metal has not risen 30%. Since December and, uh, we're where can the parallels be drawn and where did the, where does the parallel end for you Trevor?
So I think good parallel, but they're both have, uh, you know, precious metal, uh, uh, aspects as well as industrial metal aspects. But I think the difference is that the platinum has been particularly undervalued, uh, for the last six years. Um, so since we last spoke, uh, even, uh, early last year, uh, the undervaluation compared to gold and compared to palladium was quite material.
And what you're seeing now is that the recognition that platinum, uh, is used in, uh, the growth in production of green, hydrogen, and silver is used in certainly the renewable power to produce, uh, uh, renewable electric electricity from solar panels is that still has been, you know, used in that used quite a lot.
With platinum, the amount of demand growth from producing green hydrogen isn't really material, uh, the demand growth. However, from using fuel cell vehicles is really material you've had, uh, you know, figures quoted of between three and 6 million ounces of additional demand for platinum. Uh, in 10 to 15 years time, and that's a significant demand growth.
I don't think silver can, um, can expect anything like that in terms of Israel. I think that it's got a particularly important strategic role and then platinum has been so undervalued compared to gold. There's been a huge demand for precious metals. People wanting to own own gold as it are. Versifier Sydney many are owning platinum for the same reasons.
And then the evaluation compared to palladium implant and split a thousand dollars an ounce below palladium. And they can be substituted on a one-to-one basis in the quarter catalyst. So I think those kinds of recognitions that are coming through now, uh, you know, th th the parallel is just kind of interesting, but in terms of platinum, I think value's being Ricky recognized currently.
But just from a short term, more trading perspective now, Trevor platinum's relationship to gold, for example, can you characterize this relationship? Is there a relationship? What do traders need to be aware of? So, yes, I think anybody owning platinum needs to know that, you know, platinum and the process will prosecute gold or strongly correlated.
Uh, and in a sense I didn't mention is that we saw gold rush when global risk was up. When we had announcements of the vaccination, we saw the gold price weaken and platinum strengthened. But what you do get is from a short-term perspective, traders that trade gold, know that if you know, That, uh, if gold goes up $40, Pepin will go at 60.
So there's a lot of short-term trading going on, but if you go back and look. At the past, uh, 40, 45 years, uh, about 80% of that time, you'll see that platinum traded at a premium to go more recently, it's been at a significant discount to gold. So part of this run-up in price is that that discount to gold has narrowed.
And as I said, there's no reason why it shouldn't continue to move towards the gold, but for most of the time, and it kind of makes sense because. No platinum is just as precious as gold. It just hasn't been around for as long. Uh, and yet you've got this massive disconnect, so very relevant, but certainly the volatility of gold will play out into the volatility of platinum quick.
Is that, is that part of your analysis? When you say that platinum is undervalued, you're referring to, uh, the historical premium to gold and why it's not trading at a premium to gold right now. Absolutely at a, at a discount to gold, which is really unusual. And then at a discount to platinum itself in terms of absolute price level and the big discount to palladium.
I mean, that's just really much harder to explain why one-to-one substitute sits at a thousand dollars cheaper. So Trevor, let's talk, talk about the hydrogen economy. Now you mentioned earlier that during COVID people realized that hydrogen is the path forward. Can you explain why people have come. To this realization during the pandemic.
Yeah. Seven, I think there's two reasons. I think firstly, we saw during the first lockdown, significantly reduced economic activity in the world and we saw clean air. So that was the sort of first penny that dropped. And then secondly, I think, uh, countries around the world realized that the cost of the pandemic was enormous and that money to continue to address climate change in the way that they'd been addressing it was perhaps tight.
So, what they've done is they've changed policy and I focused on sustainability and that's been a, really a breakthrough. So, what countries are saying is that they've made hydrogen a mainstream fuel. And then suddenly we saw during COVID, uh, Europe published its hydrogen, uh, strategy. They're going to produce 40 gigawatts of green hydrogen by 2030.
Uh, we saw the us, uh, on the first day of the Biden administration reentering the Paris climate agreement. Uh, and that, uh, and it takes to decarbonize by 2050 and then China as well announced that they will decarbonize by 2060. So the amount of money, I think the $2 trillion budget from the pardon administration says, what people want to do is to use hydrogen, uh, as an alternative to fossil fuel, not only to decarbonize transport, but to decarbonize industry as well.
And I think the groundswell of information flow around that has led people to believe. But certainly the hundred and economy is on a green hydrogen is important. And hence platinum's role in that. Are you seeing this transition taking place now? Trevor is, is where is this just sort of, uh, a plan for the future?
Are we seeing platinum be utilized, uh, for the creation and construction of fuel cells right now? So, yeah, so the, as I said, when, when, you know, when investors will look at platinum, the amount of platinum going into producing green hydrogen is quite small. So there's a, uh, an electrolyzer called a Pema electrolyze that uses platinum.
And so it's high efficiency and preferred over the other technologies. And you might have anything between 200 and 600,000 ounces of platinum used in 10 years. So that's not really that exciting, but the key is, is that there's a big focus and huge amounts of money going into reducing the customer hydrogen.
So getting hydrogen down from over $4 per kilogram, down to $2 per kilogram suddenly makes. Hydrogen are more attractive field and fossil fuels in heavy industry as well. So suddenly you've got the subtraction and the pool from a hydrogen fuel. So although we're seeing some ounces of platinum use to produce green hydrogen, it's small, the fuel cell electric vehicle in 10 years, time is a huge platinum demand, a million to 3 million ounces.
Um, but the, the real issue is that in between those two, you've got significant heavy duty trucks. Using fuel cells. So you've got trucks, buses, trains, so there'll be a few hundred thousand ounces of platinum demand on the heavy duty side of the fuel cell. And that's now more interesting. So those are the two sort of attractions to do with a hydrogen economy, but then we'll come back to the other demand growth of platinum.
That's really a much shorter term and much more exciting. Okay, let's talk about more of the near term. Now, the platinum price round that we've seen. Do you have any idea as to whether or not this price run has been driven primarily by retail investors or institutions? So I think there's a, so when we spoke last, you mentioned that they'd been at a futures exchange and what's relevant is that if you look at the short term movements in the platinum price, they're very strongly correlated.
To futures positioning. So we had investors that were reluctant to use that futures market between about June and October. Um, fortunately there, there's now over half a million ounces of, uh, 50 ounce bars sitting in Nomics belts. Liquidity has returned and the, the bullion banks that make the market in the futures are quite comfortably doing that again.
And what we saw from sort of late November, December, Is we saw the long position in futures increasing, and I think that's, what's driven the process as they belonged position continues to increase. We got the price strength, uh, and that's on the back of a million ounces of platinum investment demand that went into ETFs in 2019, and then another half a million ounces that went into in 2020 backed by this half a million ounces of bars that was sort of putting genomics volts and then very strong import demand from China.
So you've had nearly two, two and a half million ounces of platinum that has been taken off the market without much fanfare, without much recognition. So you've had quite a tight market situation, and then suddenly you lay on to that and increasing futures position and you get a price move and it's, it's a bit circular when the price moves in this to say, why is it going up?
They come in and have a look and they say, wow. We didn't know if that gun was used in the Argentine economy. And we didn't know that substitution was as chunky as it is. And that seems to be what's driven the interest. And then you've had influence into, into ETFs, a lot of bargain coin buying associated with, with the, with, with the gold, precious metal bar and coin buy.
So it's been really a combination of factors that certainly that's played out in the price. And interestingly, there doesn't seem to be any reason why. Putnam, shouldn't continue to move towards the price of gold and the price of palladium. There's no real, there's no real nutshell. Other than, as you said, at the beginning, G people see prostate $300 and a thousand dollars and that's unusual, but it actually could move another 300 and it would be.
Not just as, just as an unusual, right? Right. Pardon Trevor. You saw what happened with silver a few weeks back with the sweets, bunch of retail investors rushed it to try to get the price up. They use various instruments to do that. And we saw premiums for our physical silver rise as a result, they've normalized somewhat, but, uh, you saw what happened.
Can the same thing happened with the platinum market. So I think the, the rated game stop issue is that if you get a lot of people acting in the same direction, you're going to get a price response. And I think the silver market was a little bit different to the equity market where Sydney had played out with, uh, with the equities.
So I think that is what it is. There's been a lot of news flow on that. Uh, I think that the interesting thing is that the premium on platinum coins, for example, last March and April were huge because what happened is that as COVID stopped flights, Um, there was pretty much no stock of platinum bars and coins in the U S so people that bought up everything and that stopped, took quite a while to come back.
It was probably only October or November when platinum bars and coins were again available in the U S so I think the, the, the realization that even in Sylvia, you could get some price classmates. Again, people that looked at solver and thought about it. And now look at platinum, say, Hey, what's interesting here.
And certainly you've got this demand growth in the, the substitution for palladium. That seems to be the most material short-term. So, yes, the, I think silver, platinum of five, if anything, you've got more investors to have a look at platinum. That, that was my next question forever is, uh, how much impact the silver squeeze has had on the platinum market.
I'm looking at the platinum chart again, and I, and I noticed that most of the run-up that we've seen over the last two months happened in February. And so that coincidence, uh, that coincides with the same time as a silver squeeze happening. So do you S do you see retail investors, uh, rushing into silver, also rushing into platinum at the same time?
I think just there's some retail investors that hadn't thought about silver and then did. And those that had some exposure to solar. I looked at Glen from Sydney. I think the retail runner was not that material in terms of the platinum price move. If you look at the NYMEX futures, positioning was about bigger.
So I think there were more institutional investors and in fairness, I think the whole rate at GameStop. Uh, a lot of institutional investors set up and looked at what was going on. And then certainly it looked at the platinum markets, I think silver platinum and big fiber. And I think that the short-term demand growth that everybody's seeing is that if you look at what's happened in precious metals, you've had rhodium that has moved over $20,000 an ounce.
You hit the lady in that went from three 50 to seven 50 to 2350. So you've still got plenty, um, uh, really way about platinum. And a lot of investors looked around and said, well, why is the leg? And there really isn't much logic. So you've now had Sylvania Stillwater. Um, who's worked very closely with BAS if they published the research last year to say that platinum can substitute palladium in gasoline catalysts, and then are talking of, you know, upwards of one and a half million ounces.
Per annum of substitution. Now that's necessary because the palladium market is going into another and it gets the ninth consecutive deficit. That rhodium market is incredibly tight. So certainly they'd one and a half million ounces of demand growth in. Yeah, three years is very material for black. And so I think all the institutional investors that are looking at it because it's sober are suddenly seeing some really chunky short-term demand growth.
And that's what's behind that futures positioning getting longer. Right. But suppose just hypothetically suppose the world were to orchestrate a squeeze on platinum and corner, the platinum market. This is a fun mental exercise. Could they do it as a platinum, large enough to sustain this kind of shock?
That's that's an interesting question. I mean, you know, the, the platinum market is, is really tiny compared to both gold and silver. Um, there's, you know, close on $4 billion, uh, in the platinum ETFs, a $4 billion. Isn't a lot. If you were to get a retail wave of people that wanted to put a few billion dollars into platinum, most certainly it would have an impact, but I think it doesn't need that.
I think the institutional investors that recognize that it's undervalued that look at the demand growth. And look at the Titan market. I think that that's the positioning. The long positioning is likely to continue to grow and take price with it with retail investors, get along for the ride. I suppose that's a, that's a conjecture.
Well, uh, that was a very interesting update. Uh, platinum has had a tremendous run. I hope to get more updates from you. It was, we get more price action down the line. Thank you very much, Trevor. I'm going to share today only a pleasure. Thank you to have it. And thank you for watching Kitco news. I'm David Lynn.