Sales of platinum on the Shanghai Gold Exchange have been gigantic since the start of this year, but have taken another leg up in the past week as prices have dipped.
This is representative mostly of stocking demand for jewellery rather than end consumption. But final demand looks pretty strong too given the strength in apparent demand is not new.
Platinum ETF holdings have also surged in the past month. This is thanks to the introduction of a new ETF based in South Africa. Strong demand for physical metal exposure from investors closest to the problems in the mining sector is indicative of how bad the situation is for SA platinum producers at present.
This isn't really new demand, but more shifting of inventory into new, more visible hands. But that doesn't mean its not supportive of prices, with the current holders of ~2mln ounces likely to hold on to platinum until prices are much higher.
So this is not so much absorbing ounces from demand flows and also lifting the price point at which the stock of above ground metal will shift.
These dynamics are in sharp contrast to gold at the moment, where falling prices is generating more investor selling. ETF holdings continue to crash, with most of the flows coming out of the large GLD SPDR Trust.
Perhaps this is a future risk for platinum, with a rush to the exit on ETFs causing a crash in prices. But that point seems to be when prices are much higher than today, given the favourable demand/supply picture and investors attitudes towards this.
One of the better aspects of the investment thesis for platinum right now is that futures positioning is relatively split. While longs have remained high, there has been a sizeable increase in speculative shorts as well.
This raises the prospect of a lift in prices from covering shorts should the metal start to rally, with palladium not potentially benefitting from this dynamic at the moment.
