Platinum and Palladium prices decreased, reversing prior gains, with Platinum reaching near its 11-year high last week. This recent price volatility suggests a potential end to the rally.

A Russian producer forecasted a balanced Platinum market this year and next, excluding investment demand. Demand from the automotive sector is expected to drop, with increases in jewellery and industrial applications not enough to offset this decline.

Including investment demand, a supply deficit of 200 thousand ounces this year and 300 thousand ounces next year is anticipated. Metals Focus initially predicted a much larger supply deficit by 2025.

For Palladium, a balanced market is projected for the same period, with a similar decline in automotive demand and limited investment demand. Rising Platinum prices since May are attributed to increased imports from China and the US, with Chinese jewellery sectors opting for Platinum over Gold and US concerns over tariffs on Platinum group metals.

Platinum prices have given back recent highs, retracing after reaching levels last seen over a decade ago. This retraction follows a steep upward move and may well mark a loss of momentum, especially given fresh guidance from major supply actors. A leading Russian company has outlined expectations of a balanced market through to next year, assuming investment flows remain flat. They cite falling automotive demand—largely from reduced internal combustion engine output—as the primary constraint on use. Increases in jewellery and industrial demand are present, but not large enough to fill the shortfall.

Nonetheless, when investment appetite is included, projections shift. A deficit of 200,000 ounces is estimated for 2024, widening to 300,000 in 2025. This is a thinner shortfall than what had previously been anticipated by Metals Focus, suggesting a softening of earlier supply concerns, though not their disappearance. The revised view undercuts any previous narrative of tightness pushing prices sustainably higher. Instead, it calls into question the durability of the previous rally, and whether the market truly believed that supply constraints were worsening.

As for Palladium, current estimates also hover around a balanced position through the next two years, again held back by low vehicle production and sliding catalytic converter use. The investment side has not picked up the slack. Without speculative or institutional inflows, the market struggles to gain any consistent upside traction.

With both metals, prices had spiked recently—especially Platinum—from speculation tied to strong imports in the US and China. Imports into China, in particular, seem driven less by industrial expansion and more by substitution trends. Chinese jewellers are leaning towards Platinum as an alternative to Gold, which has become pricey when compared on a per-gram basis. Meanwhile, US orders come amid ongoing trade concerns, with buyers perhaps looking to build inventory in the face of potential future tariffs on metals sourced from certain regions.

Faced with this, we ought to interpret the recent volatility not as a one-off but as a developing shift in sentiment. The price moves, supported temporarily by shifts in physical buying trends, were not underpinned by stronger consumption forecasts or investment conviction. Rather, they may have been opportunistic or precautionary purchases by participants trying to get ahead of possible policy shifts.

For traders operating in derivative markets, we need to remember that forward curves and implied volatilities have responded sharply to these headlines. With the supply side now appearing less strained than prior projections suggested, recent long positioning in futures and options may face pressure unless supported by fresh data. Current open interest and skew levels point to a crowd leaning towards renewed strength, but with recent price softness, there’s now more risk to the downside unless new buying appears swiftly.

Hedging activity too, particularly among industrial users, should be recalibrated. The earlier urgency to secure forward pricing might ease, allowing more flexibility in rolling strategies and even opening up cost-effective collars or option spreads as implied vol remains elevated relative to realised movements over the past month.

As we monitor positioning in both Platinum and Palladium markets, it’s vital to assess not just the spot price movements but also the rationale behind flows—whether they stem from structured demand, trade allocations, or concern over geopolitical developments. The move in May, for instance, appeared driven by precautionary restocking and metal substitution, not by a sudden leap in structural or speculative enthusiasm. Keep in mind, when positioning leans one way and physical markets disagree, corrections tend to be fast and sharp.