As of today (May 17), platinum costs $940 per ounce. The metal has rallied 4.3% over the last week, particularly after China announced a $124 billion initiative to build a new "Silk Road" meant to promote global trade across Asia and Europe.
The news has given platinum prices a much-needed rebound. On May 9, they fell to $900.90, which was the lowest settlement since Dec. 28, 2016. Since then, platinum has gained 4.3% and is up 1.2% just today.
Money Morning Resource Specialist Peter Krauth thinks the metal will keep climbing throughout the year. Today, we're going to give you our 2017 platinum price forecast, which includes Krauth's bold new price target for the end of the year.
First, here's more on why prices have been gaining traction lately...
Why Platinum Prices Are Up 4.3% in the Last Week
At a summit in Beijing on Sunday, May 14, Chinese President Xi Jinping announced a pledge of $124 billion to create a globalization project being called the new Silk Road.
Formally called the "One Belt, One Road" initiative, the infrastructure project will involve building massive transport and energy resources across Asia, the Middle East, Europe, and Africa. These resources include roads, bridges, gas pipelines, and power plants, among others.
The platinum price gained 1.2% on Monday as traders reacted to the implications of the announcement. Buyers propped prices up on hopes that the One Belt initiative would boost platinum demand due to the metal's various industrial and construction uses. Investors also bought platinum as a hedge against uncertainty surrounding China's possible effect on globalization, especially in response to President Trump's long-touted "America First" policy.
While China's announcement just lifted prices this week, platinum has been primarily boosted over the last five sessions thanks to a weakening dollar.
Since May 9, the U.S. Dollar Index (DXY) - which measures the dollar against a basket of other currencies - has fallen from 99.54 down to 98.08. Although that may not seem like a big drop, any drop in the dollar below an even level like 99.00 can be very bullish for precious metals.
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You see, metals like platinum, gold, and silver often move inversely with the dollar during the short term. That's because those metals are priced in the dollar around the world. When the dollar declines in value against other currencies, it makes dollar-priced commodities like platinum cheaper for international buyers. In turn, this boosts demand for those buyers and ultimately raises prices.
While the falling dollar is short term, Krauth is eyeing two long-term trends that could send platinum prices to our high target this year.
Here's our full platinum price prediction for 2017...
Our Bullish Target for the Price of Platinum in 2017
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According to Krauth, platinum will rise to $1,300 per ounce by the end of December 2017. That would indicate a 38.3% return for investors who buy platinum at the current price of $940.
The first reason we're bullish is surging platinum demand and dwindling supply around the world.
You see, platinum is one of the rarest of the precious metals. It's far rarer than silver, copper, and even gold.
The leading global producers of platinum are South Africa, Canada, Russia, Zimbabwe, and the United States. More than two-thirds of the world's supply of platinum comes from Africa.
In 2016, these leading global suppliers produced 168.9 metric tons of platinum. Meanwhile, a whopping 3,100 metric tons of gold was produced last year. That gives investors some idea of just how little global supply there is of platinum compared to gold.
This short supply will not be enough to meet global demand. According to the World Platinum Investment Council on May 15, the deficit in the platinum market is expected to narrow to 65,000 ounces by the end of 2017. That would mark the fifth straight year of a supply deficit.
The second reason Krauth projects prices to rise is platinum's role as a safe-haven investment.
The Dow Jones has rallied more than 14% since the election without any major pullbacks. When markets eventually correct, investors historically have moved toward safe havens like gold and platinum. These metals are good investments during times of volatility because their value typically steadies or increases when markets drop.
Although no one can predict when a stock market will lose value, it is a given that stock markets go down at some point. Investing some money in platinum will be healthy for your portfolio once the downturn inevitably arrives.
So because of very low supply, strong demand, and its safe-haven appeal, the price of platinum could rally 38.3% to $1,300 this year.
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