• Shortfall in platinum to increase threefold to 567,000 ounces
  • ‘Benign fundamental backdrop’ should support both metals

An 18-month bear cycle in platinum and palladium has come to an end, with deficits set to rocket, according to Metals Focus.

Rising prices at the start of the year marked a turning point for the metals, which will be pulled higher by renewed interest in gold and “hefty deficits,” though weak investor interest may limit rallies, the research firm said in a report Monday. The shortfall in platinum, excluding stock movements, will climb more than fourfold to 567,000 ounces, while that in palladium will double to 1.4 million ounces, the largest reading in a series stretching back to 2010.

Both metals fell more than 50 percent below their post-financial crisis peaks, with general malaise in the precious metals brought about by weakness in gold since 2012. Protracted strikes in major producer South Africa in 2014 did little to revive investor interest.

“Although we cannot rule out the possibility of a near-term correction, we expect prices to trend upwards over the rest of the year,” the company said. “The benign fundamental backdrop for platinum and palladium should also be supportive.”

The company forecasts platinum may rise to a peak of $1,200 an ounce before the end of 2016, while palladium may touch $750 an ounce in the period. Platinum traded at $1,056.52 and palladium at $598.80 at midday in London Friday, according to Bloomberg generic pricing.

Mine production of platinum is set to fall 5 percent in 2016, after reaching a four-year high of 6.3 million ounces last year, the company said. Palladium output will fall by a similar margin to 6.5 million ounces after soaring to the highest level since 2010.

More quarterly demand and supply figures:

  • Total platinum supply to drop 3 percent to 7.8 million ounces
  • Demand to climb 2 percent to 8.3 million ounces
  • Autocatalyst demand to rise 5 percent to 3.4 million ounces
  • Jewelry demand to remain little changed at 2.5 million ounces
  • Total palladium supply to decline 4 percent to 8.9 million ounces
  • Demand to rise 3 percent to 10.3 million ounces
  • Jewelry demand to retreat 12 percent to 250,000 ounces, after slumping 26 percent
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