Platinum is fierce? Goldman Sachs is not optimistic!

On May 20, after breaking through a trading range that lasted for a decade, platinum experienced a significant market surge, reaching a four-year high of $1,280 per ounce. Goldman Sachs has recently warned that this speculative frenzy is unlikely to last.

On June 12, according to news from the Wind Trading Desk, Goldman Sachs pointed out in its latest research report that speculative and ETF demand has become the main driving force behind platinum's rise to $1,280 per ounce, rather than fundamental improvements. Once the speculative enthusiasm wanes, a price correction will be inevitable.

Analysts Lina Thomas and Daan Struyven clearly stated in the report that three major factors—price sensitivity of Chinese buyers, structural decline in automotive demand, and stable growth in global supply—will lead platinum prices back to their original trading range.

Over the past decade, platinum prices have been trapped in the range of $800 to $1,150 per ounce. On May 20, an optimistic report released by the World Platinum Investment Council (WPIC) triggered a breakthrough surge in platinum prices. WPIC predicts a supply gap of about 1 million ounces (approximately 31 tons) this year, equivalent to nearly 20% of annual mineral production.

With the influx of speculative funds and the warming demand for ETFs, platinum prices soared, nearing the four-year high of $1,280 per ounce.

The Chinese Market is Highly Price Sensitive

Goldman Sachs stated that the Chinese market accounts for about 60% of the global new platinum production, and its buyers exhibit a high degree of price sensitivity—buying heavily when prices are low and quickly withdrawing when prices are high.

The report pointed out that this strategic buying pattern has been a significant driver of platinum's range-bound fluctuations over the past decade.

Data shows that nearly 50% of China's platinum imports are driven by price-sensitive jewelry and investment demand.

After the price drop following the so-called "reciprocal tariffs" in April in the U.S., the extraction volume of platinum on the Shanghai Gold Exchange increased, which is an important indicator of Chinese jewelry and investment demand, leading to a significant increase in China's platinum imports that month.

However, the price rebound that began in mid-May has suppressed Chinese jewelry and investment demand, confirming the price sensitivity of Chinese buyers.

Goldman Sachs stated that this "buy low, sell high" model sets natural upper and lower limits for platinum prices, making it difficult to achieve sustained breakthroughs.

Automotive Demand Faces Structural Decline

Platinum demand is facing a double blow from the automotive industry.

The report pointed out that in China, the rapid adoption of electric vehicles is eroding the long-term demand for platinum in gasoline vehicle catalysts, while the elimination of fuel vehicles is continuously increasing the supply of scrap.

Goldman Sachs' automotive industry analysts expect that the scale of gasoline vehicles in China has peaked, which will structurally suppress the demand for platinum in automotive catalysts. In Western markets, the scale of gasoline and hybrid vehicle fleets is expected to remain relatively stable, which will not have a significant positive impact on platinum balance As Goldman Sachs stated in the report:

This structural change in demand means that platinum has lost an important growth driver, further limiting the upside potential for prices.

Global Supply Stable with Moderate Growth Expected

Unless power restrictions in South Africa re-emerge, Goldman Sachs expects global platinum supply to remain stable or grow moderately. South Africa accounts for about 70% of global platinum production, with the remainder primarily coming from Russia.

Guidance from major platinum group metal miners in South Africa indicates that platinum group metal supply will grow moderately by 12% by 2025.

Goldman Sachs noted in the report that while South African platinum supply has inherent resilience, the main risks to production remain operational disruptions. Although not the base case, power outages and labor strikes in South Africa remain the most significant threats to supply. Such events could completely halt production and lead to significant but usually temporary supply shortages.

It is worth noting that since March 2024, load shedding (planned power outages) in South Africa has almost completely ceased, and Goldman Sachs economists believe the risk of persistent and disruptive outages re-emerging is low, but outages and labor strikes remain the main risks to production