Recently, I’ve been looking at the historical trend of platinum, and I’ve realized that this market is indeed somewhat undervalued. Compared to gold, which is so popular, platinum’s notoriety isn’t as high, but its investment logic is actually quite interesting.

First, let’s start with a basic understanding: the biggest difference between platinum and gold lies in their properties. Gold is mainly a financial asset, while platinum has a stronger industrial attribute, which determines that their price movements are completely different. Over the past ten years, gold’s price increase has significantly outpaced platinum’s, and the reason is here— the Federal Reserve’s continuous monetary easing has driven up gold, but platinum is more affected by the automotive industry cycle.

Looking back at the wave in 2020-2021, platinum rose from $852 in March to $1,319 in February, which is the biggest fluctuation in nearly a decade. At that time, the Fed was flooding the market with liquidity, the dollar was depreciating, and investors heavily shifted into precious metals. But starting in 2021, with high inflation, the Fed began tightening, and platinum prices started to retreat to the $900–$1,050 range.

Interestingly, the surge in the second quarter of 2023 was mainly driven by South Africa’s power shortages. South Africa accounts for 91% of global production; power outages led to decreased output, pushing platinum prices higher. This shows how much supply-side changes can influence platinum’s price trend.

From 2024 to now, several factors are worth paying attention to. First, the US M2 money supply growth has started to pick up again since the second half of last year, albeit modestly, but at least it’s favorable for precious metals. Second, global automobile production has been increasing, especially in China, which means demand for platinum catalysts is also growing.

Another factor to watch is substitution effects. Platinum and palladium can be substituted for each other at a 1:1 ratio. Currently, platinum prices are cheaper than palladium, so automakers tend to substitute platinum for palladium. This substitution is expected to continue until 2025, which is positive for platinum demand. Plus, geopolitical factors—using palladium increases reliance on Russia (which supplies 40% of the world’s palladium)—companies are definitely more inclined to use platinum.

Long-term, the World Platinum Investment Council’s research shows that platinum has entered a continuous shortfall phase starting from 2023, expected to last until 2027. This indicates that over the long cycle, platinum indeed has investment value. According to authoritative forecasts by Harry’s, platinum price fluctuations are expected in the range of $800–$1,100, with the current position at $900. The upside potential is $200, the downside is $100, with a risk-reward ratio of 2:1, making it worth paying attention to.

Additionally, the COT index is at a ten-year low, indicating that short positions are quite crowded. Once the market reverses, there could be short squeeze pressure. From multiple angles, the current entry point offers a good cost-performance ratio.

If you’re interested in precious metals investing, you can participate in platinum trading through contracts for difference (CFDs), as many platforms offer this. The key is to understand the logic behind platinum’s price movements—both macroeconomic monetary policies and industry cycles matter, as well as supply-side changes. Gold mainly benefits from financial attribute dividends, but platinum’s opportunity lies in the combination of industrial demand and supply shortages. The price trend over the past two years has indeed validated this logic.