The supply of these metals is unlikely to improve in the near future. Most silver (75 per cent) is mined as a by-product of other metals. A dearth in mining investment amid weak metal prices in recent years means that the expansion of mined silver supply is unlikely. Almost 80 per cent of platinum is mined in South Africa. Such mine concentration mean that the supply of platinum is vulnerable to local shocks such as unionised worker strikes.
Platinum is used in vehicle autocatalysts (devices that convert pollutants from the combustion of fuel into harmless gases). Globally, tightening emission standards will favour higher loadings of platinum group metals in these devices. Platinum also has a strong correlation with the South African rand. We expect a modest rand appreciation to support platinum prices.
We believe silver’s fair value price by the year end is around $20 an ounce (+20 per cent) and platinum’s fair value price is around $1,020 (+10 per cent).
Nitesh Shah is commodities strategist at ETF Securities
