Commodity Wrap - Platinum, Natural Gas (05.01.2021)

Platinum:

• Silver, and especially platinum, failed to see such a significant rebound in recent years as it was in the case of gold. On the other hand, economic recovery that is expected to happen this year may have a positive impact on these precious metals. Palladium trades near record highs

• Over 50% of platinum is used in an industrial way therefore price is often behaving differently than gold

• Platinum price has reached the highest levels since 2016

• Gains on the precious metal markets, and the whole commodity market, are driven by fear of rising inflation amid expansive monetary policy conducted by central banks

• There is much less platinum in-ground than there is gold. Annual platinum production is around 10 times smaller than gold production

• Ratio of gold to platinum prices has jumped above 2 last year - historical mean sits at around 1. One may expect that in case economic recovery continues this ratio will fall back towards 1.5 - the level from the beginning of 2020

• Platinum as well as silver may become desired commodities, compared to other asset classes, given undervaluation in recent years

• Platinum is used in hydrogen fuel cells what may be an important long-term factor given ongoing shift towards alternative fuels

Ratio of gold to platinum prices has been on the rise for many years and has reached extreme values at the beginning of the coronavirus pandemic. Return of industrial demand combined with a rebound in investment demand may lead to platinum's outperformance over gold. Source: gold.co.uk

What to look for in a Platinum Investment report? There are expectations of a significant rebound in demand from the automotive sector as well as in glass and chemical sectors. Another point to note is small interest from ETFs compared to demand for physical platinum. Should this trend reverse, demand could turn out to be significantly higher than supply, what could lead to a big decline in available stockpiles. Source: Platinum Investment

Record peak on the platinum market was reached in a completely different period than in the gold market. This was related to a boom in the automotive sector. Potential economic revival combined with "return to normality" may boost prices of platinum and other precious metals, like silver or palladium, just as it is the case now with copper. Source: xStation5

Natural gas:

• Natural gas prices in the US are rising and are at their highest level since Christmas
• Price is testing  the neckline of a large head-and-shoulder formation that appeared during the last quarter of last year
• Gas inventories decline in line with seasonality, which is associated with high gas consumption. It is not excessive, but temperatures in the United States are low
• The recent sharp declines in inventories is more or less in line with forecasts. Only a sharp drop in temperature could lead to a drop in inventories to the 5-year average, which would certainly trigger an interesting price response
• Seasonality may suggest consolidation, slightly higher price levels in the coming week
• US gas production is still around 5 billion cubic feet per day lower than in the same period a year ago
• LNG gas prices in Asia and Europe are rising strongly due to a significant increase in demand, also due to the fear of lower temperatures

Currently, gas consumption is significantly higher than supply, which is in line with the seasonality. Nevertheless, last year's excess value of demand, along with a significant rebound in US LNG exports to Europe or Asia, could also lead to a price boost. Source: EIA

For example, gas prices in East Asia (Japan) significantly exceed what is happening in the United States. Over the past few months, a several hundred percent increase in prices has been observed. Source: Celsiusenergy.net