UBS targets platinum price of USD 1,100/oz by mid-2025

Investing.com -- UBS Global Research has maintained a cautiously optimistic outlook on platinum, with a target price of $1,100/oz by mid-2025 in a note dated Monday. The note mentions that while the market conditions are currently challenging, there are factors that could support this price target over the next year.

One of the key drivers behind this outlook is the expectation that the U.S. Federal Reserve will begin its easing cycle soon. Lower interest rates are anticipated to provide support for real assets, including platinum. 

“But we expect platinum to lag gold until lower rates support stronger industrial activity,” the analysts said. This implies that while platinum may eventually benefit from a shift in the economic environment, it may not be the first to react compared to other precious metals like gold.

For investors with a high-risk tolerance, UBS continues to recommend managing the downside price risks associated with platinum. The metal's price can be volatile, and the current market conditions suggest that it is prudent to remain cautious, despite the modestly positive long-term outlook.

China's platinum imports have been robust, particularly in the first half of 2024, with over 59 metric tons imported. This figure surpasses the previous record of 53 metric tons in 2021. However, June's imports of 4.3 metric tons were somewhat weaker, indicating potential short-term fluctuations in demand.

China remains the world's largest platinum consumer, having consumed 66.1 metric tons in 2023. Last year, China imported nearly 102 metric tons of platinum, suggesting some level of stockpiling. Despite this, the demand for platinum in China has seen a shift in recent years.

Traditionally, the jewelry sector in China had the highest demand for platinum. However, over the past five years, demand in this sector has more than halved. The glass industry has now emerged as the leading consumer of platinum in China, driven by the construction of new display-glass plants. This sectoral shift reflects changes in consumer preferences and industrial requirements.

The decline in platinum jewelry demand is attributed to the metal's loss of its status as the most prestigious jewelry material. According to Johnson Matthey (LON:JMAT), this decline is driven by platinum's poor price performance. The last time platinum was priced higher than gold was in 2015, and currently, Chinese consumers show a clear preference for gold jewelry over platinum.

Another factor weighing on platinum demand in China is the reduction in car production this year compared to last year.

Given these challenges, UBS has revised its platinum price forecasts for December 2024 and March 2025 downward by USD 25/oz.