XPTUSD forecast for 08.07.2020

July 8, 2020

XPTUSD forecast: Platinum is to start risingDmitri Demidenko

Platinum price forecast for today

The XPT/USD has been consolidating for too long, it is time to start

a trend

Financial markets are constantly changing. Yesterday’s winners could at once turn into outsiders, and the assets that were thought frustrating can surge and pleasantly surprise investors. A typical example is the precious metals sector. Palladium was a fantastic investment over the past four years, it has grown in value by 4.5 times and reached its all- time highs in February, while the platinum price has hardly changed. Over the next 12 months, everything can radically change. There is going to be real action in the precious metals market, and I am interested to witness it.

According to Commerzbank, the platinum market will be fundamentally weak in 2020-2021. There was an overproduction of platinum for a long time, which resulted in the growth of surplus and the drop in platinum prices. In 2019, amid an increased investment demand, there was recorded the deficit, however, the bank’s analysts say that the demand for the ETF products, platinum bars, and coins won’t reach last year’s levels, they forecast the [XPT/USD][1] will hardly cost more than $900 in 2020 and $1000 per ounce in 2021.

In my opinion, platinum is a more promising asset than Commerzbank suggests. The world’s biggest platinum producer is South Africa, which produces about 73% of the world’s platinum. The platinum production in South Africa has dropped by 62% in April due to the pandemic, and it will hardly rebound to the pre-crisis levels earlier than the second half of 2022. This fact, together with the growth of the investment demand, supports the bulls.

Dynamics of demand for platinum bars and coins

![LiteForex: XPTUSD forecast for 08.07.2020][2]

Source: Bloomberg

I think the major negative factor for platinum prices is the problems of global car production. According to Umicore, global car production will decline by about 25% in 2020. Johnson Matthey expects the platinum demand to substantially decline. About 35% of the platinum demand is associated with autocatalysts. However, the proportion of precious metals used in catalytic converters has increased by 25% in 2017-2019, which supported the [XPT/USD][1] bulls.

Dynamics and structure of platinum supply and demand

![LiteForex: XPTUSD forecast for 08.07.2020][3]

Source: Johnson Matthey

In my opinion, everything is not that bad. First, the automotive industry, like the global economy in general, has reached the bottom in April and should be gradually recovering. Second, there are carried out researches on replacing more expensive metals with cheaper ones in industrial production. Platinum costs 2.2 times less than palladium, which should support the growth of the demand. Finally, about 52% of platinum in the autocatalysts production is demanded by Europe and China, whose GDPs will be recovering faster than, for example, the US economy.

In my opinion, the platinum traders can also use the [EUR/USD][4] driver, the growth-gap between the euro area and the USA. Considering the share of Europe in the global platinum demand, it is not surprising that the EUR/USD has a strong positive correlation with the platinum prices.

Dynamics of EUR/USD and platinum

![LiteForex: XPTUSD forecast for 08.07.2020][5]

Source: Trading Economics

I expect the [XPT/USD][1] growth to $940 and $1030 in 3 and 6 months. The main trading scenario is to buy.

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Price chart of XPTUSD in real time mode

![XPTUSD forecast: Platinum is to start rising][8]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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