Platinum is making steady inroads into the Indian jewellery market, despite the country’s voracious appetite for gold. If the trend persists, platinum may well turn out to the real precious metal of the future.

This comes out clearly in the latest annual survey – Platinum 2013 – released by Johnson and Matthey (JM).

The refining and manufacturing firm noted in its survey that India had a strong consumption growth of the precious metal in 2012.

Estimating Indian consumption at over 100 million ounces, JM attributed the strong growth in consumption to the organised retail sector. It is known that many large retail chains have made space for platinum jewellery which offered higher profit margin than gold jewellery.

Additionally, platinum jewellery marketing has been aggressive and more effective. In 2012, overall world demand for platinum from different segments — auto-catalyst, industrial, investment and jewellery segments — remained flat at a little over eight million ounces.

Global market

However, jewellery demand showed a marked increase of 3,00,000 ounces to 2.78 million ounces. After a surplus of 4,50,000 ounces in 2011, world platinum market went into a 3,75,000-ounce deficit in 2012 (a 12-year low) due to sharp decline in supplies from South Africa, the world’s leading producer.

The platinum market is expected to be in balance in 2013 with supplies unchanged from the previous year.

Observing that ‘platinum market may not need additional supplies’ as demand outlook is weak, especially for car auto-catalyst in European market, JM asserted that investor demand or speculative demand will generate price volatility and potentially determine whether the overall market will go into surplus or deficit.

Price forecast

JM has forecast that compared with the current price of $1,483/oz, platinum prices will average $1,570 in the next six months and move in the $1,475-1,710 range.

Interestingly, after years of being a laggard, platinum prices have stayed ahead of gold prices this year. The situation is likely to continue as gold faces serious downside risks.

Palladium outlook

As for palladium in 2013, the market is forecast to be in deficit for the second year in a row by 1.1 million ounces.

Obviously, there will be upward pressure on prices. JM said weak supply and strong demand can drive palladium prices in the short-term, but price gains are likely to be capped by high stocks.

Palladium price is forecast to average $740/oz in 2013 (current price $710) and trade in a range of $635-830 an ounce in the coming months.

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