Platinum draws fresh interest from China's jewelers as gold prices test buyers' wallets
Chinese jewelers are snapping up platinum as they seek to bounce back from a slump in gold jewelry sales, an industry group said.
Surging gold prices, which hit a record high above $3,500 an ounce in April, have deterred even buyers from China, who have a cultural attachment to the yellow metal.
In the first quarter of the year, gold jewelry sales in China tanked nearly 27% from a year ago to 134.5 tons, according to the China Gold Association.
Meanwhile, gold bar and coin consumption surged nearly 30%, showing that investor demand for haven assets remains strong.
"Jewelry fabricators and distributors are trying to save themselves because gold jewelry sales are falling off a cliff. They need to find a new metal for jewelry so that they can survive," Weibin Deng, the regional head for Asia Pacific at the World Platinum Investment Council, told Business Insider.
China imported 11.5 metric tons of platinum in April, its highest monthly intake in a year.
That demand has helped push global platinum prices up around 40% year-to-date, with spot prices near $1,265 per ounce. Spot gold prices have also surged, up roughly 30% over the same period.
The price of platinum is still about one-third of gold, making the white precious metal a compelling proposition for Chinese consumers. In China, jewelry is generally priced by weight rather than on a per-piece basis, said Deng.
"It cannot be too expensive, otherwise people wouldn't buy it," he said of the price-sensitive Chinese market.
Goldman Sachs analysts wrote on Tuesday that platinum's blistering rally lacks fundamental support. They said the metal's issues include price-sensitive Chinese demand, slowing auto demand, and the expectation that there will be no significant decline in supply.
The analysts attributed strong gains in the platinum market to speculative demand and high gold prices, which are keeping investors away from trading in the yellow metal.
"This hesitancy likely stems from investors believing they missed the initial rally," wrote the Goldman analysts, referring to the blistering gold rally earlier.
"Instead, interest has shifted to other precious metals as investors seek catch-up opportunities," they wrote.
How the World Platinum Council plans to boost demand
The WPIC is stepping up marketing and public education to position platinum as a precious metal that has investment value and room to run, Deng said.
Deng said the council is also working with Chinese jewelers to be more efficient in terms of fabrication and market operations to lower prices for consumers
Deng said it's more expensive to work on platinum than gold as it requires more energy to melt the white metal. But reducing production costs is key to making platinum jewelry more accessible to consumers, he added.
Another challenge: The gold market is far more liquid. It's easier for consumers to sell or trade in gold jewelry with a small discount.
WPIC is partnering with jewelers in China to develop similar resale channels for platinum pieces.
Platinum isn't just for jewelry. It's used in everything from car parts to electronics. That broad demand helps support its value.
But according to Deng, it's platinum's visibility in jewelry that plays a crucial role in how consumers perceive it as a precious metal.
"Gold and silver have long been seen as currencies and stores of value around the world. To make the platinum jewelry market sustainable, consumers need to view platinum the same way — as a store of value," he said.
Deng acknowledged that gold is likely to remain the ultimate store of value in the eyes of the consumer, but even a small demand switch from gold to platinum would be significant.
The BofA analysts wrote last week that even a 1% switch in gold to platinum jewelry could help double the white metal's supply deficit to 1.6 million ounces, which would help support prices.
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