The recent and sudden surge in platinum share prices has caught investors by surprise and, according to Noah Capital Markets analyst Rene Hochreiter, has taught them a lesson.
That lesson is – “don’t turn your back on platinum shares, ever” – as he pointed out that over the last six months the “trough to peak prices” have taken off with Impala Platinum (Implats) up 75%; Northam Platinum up 50%; Sibanye Stillwater up 38% and Anglo American Platinum up 27%.
Analysts quizzed at the PGM Day investment conference held last week in Johannesburg were generally dismissive of the recent price gains in the platinum stocks.
SBG Securities mining equities analyst Adrian Hammond described the price movements as “purely speculative” saying he does not expect a proper recovery in the sector until next year while JP Morgan analyst Catherine Cunningham commented “there is a bit of head-scratching. Nothing fundamentally has changed.”
Hochreiter agrees to an extent commenting “there is not much reason for pgm share prices to go up” but he says “they are flying” because of a number of factors.
The first factors are technical with pgm shares hitting the bottom Bollinger band of their respective share prices which makes them cheap. The platinum price is also rising because it is being pulled up by gold’s strength.
Hochreiter comments, “Gold is pulling up platinum due to blind algo (algorithm) trading that only has a dumb techie behind the reason for what the algo is doing. “
He adds that investment demand for platinum is also rising because of increasing geopolitical risks. “The gold/platinum link makes platinum a good proxy for risk insurance. As with the heavy duty buying of platinum coins and bars during Covid, so the latest wars and anticipated wars are increasing investment demand for pgms.”
Hochreiter highlighted Indian demand for platinum which he described as “amazingly strong” and commented, “the Indians are the most price-sensitive, savvy buyers of gold and platinum of all, and platinum is currently seriously cheap by comparison to gold.”
Finally, Hochreiter comments that, because of the suspension of trading of Russian palladium and other pgms on the London Metal Exchange, there was a perceived shortage of pgms even though metal was still coming out through India, China and the Middle East at a $20/oz discount for the Russian metal.
Hochreiter – who has for long been amongst the most bullish analysts on platinum – concludes that, “the next technical formation for all the platinum shares is a golden cross. This is bullish in the extreme and can lead to long periods of upwards movement of share prices above their respective 50 DMAs (daily moving average).”
