Question: The platinum price has fallen well below gold’s price and it continues to underperform the other precious metals. What is happening in the platinum market?

Answer: We see a handful of factors driving the recent declines in platinum. For starters, it is facing the same challenges we find in the gold and silver markets.

The dollar has been getting stronger, interest rates are rising, and traders on Wall Street have rarely been more carefree. Mainstream investors are positioning for economic strength, not looking for safety.

Platinum is trading like the other precious metals, which is to say performing poorly. As of this writing, platinum is down 16% for the year.

Platinum is used in autocatalysts,
coins, and jewelry.

Compare that to silver’s decline of 17% and the price action looks pretty much in-line.

There are some other fundamentals behind platinum’s underperformance in the past few years though. Demand from automobile manufacturers is weakening significantly – forecast to be down 6% this year.

The prognosis for diesel cars is even worse, and that has hurt platinum demand more than the other metals. Diesel vehicles demand primarily platinum for their catalytic converters, while gasoline exhaust systems use mostly palladium.

The 2015 scandal involving Volkswagen revealed that diesel is not nearly as clean as thought previously. The car maker had been gaming the emissions testing system, and platinum-based catalytic converters were less efficient at scrubbing out unspent fuel from diesel engine exhaust.

Those revelations have had a serious impact on platinum demand – particularly in Europe where diesel had widespread adoption based on the false assumption that it was dramatically more “green” than gasoline.

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