Investing.com – Prices have remained within a relatively narrow range despite persistent market shortages, according to strategists at UBS.
Over the past three years, the precious metal has fluctuated between $850 and $1,150 per ounce, with an average of around $962/oz – close to the current spot price.
This stability has persisted despite tight market conditions, frustrating market watchers who expected prices to rise.
UBS suggests that the main reason for this lack of upside momentum lies in increased above-ground inventories.
Data from the World Platinum Investment Council estimates these reserves at approximately 4.034 million ounces by the end of 2023.
“That number would likely need to fall below 2 million ounces to support meaningful price appreciation, something we have seen with palladium in the past. We believe this could be the case in 2026,” UBS said.
A similar dynamic has previously played out in the palladium market, where prices soared as excess supplies were depleted.
The 2025 outlook suggests that the platinum market will remain undersupplied, even as autocatalyst scrap supplies are expected to recover.
UBS notes that the secondary supply of old catalytic converters is generally linked to the cycle in which cars are scrapped approximately fifteen years after production.
However, the pandemic disrupted this cycle, causing new car production to slow between 2020 and 2022, keeping older vehicles on the road longer than usual.
High inflation and rising interest rates have exacerbated the problem, putting pressure on household budgets and driving demand for used cars rather than new ones.
“We expect a modest recovery in secondary supply next year as the larger backlog of older cars on the road will have to be cleared at some point,” UBS said.
But they also warn that if these cars remain in use any longer, it will continue to limit the amount of platinum available for recycling and keep the market tight.
Given the combination of inventory gluts and supply dynamics, UBS maintains a “modestly positive” platinum price outlook, with a target of $1,100/oz by mid-2025.
Still, the metal is likely to underperform gold until falling interest rates spur stronger industrial activity.
Investors with a higher risk appetite are advised to hedge against downside price risks, UBS suggests, as the metal is unlikely to post gains until above-ground inventories shrink further.
