While markets have focused on the recent sharp decline in gold prices, the broader precious metals sector has also come under heavy selling pressure, with platinum group metals among the hardest hit, according to a report from Bank of America.
Both platinum and palladium recently fell to their lowest levels of the year as pressure from slowing global economic growth and geopolitical tensions continued to weigh on the sector.
Economic slowdown and Middle East tensions weigh on platinum group metals
The bank’s commodity analysts said the rally in platinum group metals has lost momentum since late January, largely due to movements in gold and ongoing economic headwinds related to the Middle East conflict, which continue to negatively affect industrial demand for these metals.
Despite the recent weakness, the bank maintained its long-term bullish outlook for the sector, noting that it remains optimistic about gold heading into the fourth quarter. Bank of America believes any renewed rally in gold could draw investors back into platinum group metals and support prices.
Spot platinum fell to around $1,711 per ounce, down more than 2% during the session, while palladium traded near $1,203 per ounce, up roughly 0.5%.
Since the sharp selloff on Friday, platinum has lost more than 9% of its value, while palladium has fallen more than 6%.
Ambitious price targets despite weak industrial and jewelry demand
Despite current pressures, Bank of America still expects platinum to average around $3,000 per ounce between the fourth quarter of 2026 and the first half of 2027.
The bank also forecasts palladium to average around $2,200 per ounce during the final three months of the year.
Platinum group metals delivered strong gains in 2025 as escalating global trade tensions and threats of tariffs on precious metals caused significant disruptions in physical market liquidity.
However, analysts noted that most of those concerns faded after tariff threats failed to materialize on a broad scale.
According to the report, the absence of tariffs led to more than 200,000 ounces of platinum leaving NYMEX warehouses, equivalent to roughly half of the inflows recorded during the second half of 2025.
Palladium experienced outflows in late January before sentiment reversed after the US Department of Commerce imposed final anti-dumping duties of 133% and countervailing duties of 109% on Russian palladium.
Structural shifts in demand
The bank also highlighted structural changes in demand for platinum group metals.
Platinum is expected to record a modest supply deficit this year, while palladium is projected to remain in a slight surplus.
Analysts pointed to China’s rapid shift toward electric vehicles as a key source of market volatility, given the reduced demand for internal combustion engine vehicles, which rely heavily on platinum group metals in catalytic converters.
Electric vehicles are expected to account for about 40% of China’s light-vehicle production this year, surpassing traditional combustion-engine vehicles for the first time. Conventional vehicles are projected to represent 36% of production, while hybrid vehicles account for the remaining 24%.
Production of internal combustion engine vehicles in China has already fallen to around 14 million units in 2025, compared with 21 million units in 2020.
By contrast, the transition toward electric vehicles remains slower in Europe and the United States, particularly after Washington rolled back some of its earlier electrification initiatives.
Weak jewelry demand in China
Demand for platinum jewelry has also slowed, particularly in China, where elevated inventories accumulated during the manufacturing boom of mid-2025 continue to weigh on the market.
Although some of those inventories have been recycled, retailers still hold large stockpiles amid weak consumer demand, increasing the risk of a significant contraction in Chinese jewelry manufacturing volumes this year.
Energy costs threaten South African production
Despite uncertainty surrounding global demand, Bank of America believes supply-side risks could become increasingly important in the coming period.
The bank noted that persistent Middle East tensions, higher energy prices, and inflationary pressures could negatively affect production, particularly in South Africa, one of the world’s largest producers of platinum group metals.
South Africa depends heavily on imported oil and continues to face constraints in domestic refining capacity, making its mining sector highly sensitive to rising fuel costs.
Diesel remains widely used in mining operations, transportation networks, and backup power generation, especially amid the country’s ongoing electricity shortages.
Diesel prices have surged since the conflict began, while state-owned utility Eskom increased electricity tariffs by 8.76% effective April 2026, significantly raising mining costs.
In this context, Sibanye-Stillwater reported a 13% year-over-year increase in unit operating costs during the first quarter, citing ongoing inflationary pressures, including higher labor and energy expenses.
During Thursday’s trading session, spot palladium rose 1.5% to $1,264 per ounce as of 16:00 GMT.