The changing inflation dynamics of Platinum in US manufacturing
Gold and Platinum: More Than Just Safe-Haven Assets
Historically, investors flock to precious metals during periods of economic uncertainty. This trend was evident at the onset of the COVID-19 pandemic and is reemerging in early 2025.
Figure 1
COMEX gold and platinum stockpiles are rising, not necessarily due to oversupply but due to heightened trading activity and inflation fears. As financial markets anticipate inflation, especially after the decision to slow down rate cuts from the Fed in December’s meeting, large inflows into gold and platinum futures pushed prices higher (Figure 2a and 2b). However, platinum’s recent price performance suggests a weaker response to monetary policy compared to gold. The accumulation of COMEX platinum inventories may reflect broader economic risks, particularly those linked to inflation expectations and industrial production shifts.
Figure 2a
Figure 2b
Platinum’s Industrial Role and Inflationary Implications
Unlike gold, platinum’s role as an inflation hedge is tied to its industrial applications rather than its store-of-value function. As firms anticipate rising production costs, platinum stockpiles may reflect forward-looking inflation expectations rather than immediate price pressures.
Platinum remains critical to U.S. auto manufacturing, particularly in catalytic converters. While demand is expected to remain stable in 2025, potential trade disruptions and policy shifts could exacerbate inflationary pressures. President Trump’s push to revitalize domestic auto production may increase platinum demand, but threatened tariffs on Mexico and Canada—key suppliers of auto parts and raw materials—could raise production costs and strain supply chains, leading to higher vehicle prices, particularly in the used car market.
U.S. industrial activity is set to be a key inflationary driver in 2025, driven by anticipated deregulation and increased capital investment. The Philadelphia Fed Manufacturing Business Outlook Survey recently reported a 7.01% increase in inflation expectations, with 40.4% of firms planning to boost capital expenditures.
Industrial metals continue to be reliable inflation indicators, with rising copper futures prices suggesting that manufacturers anticipate robust economic activity, adding cost pressures across industries.
Figure 3
A Multifaceted Inflationary Landscape
Inflation is rarely driven by a single factor. Our model highlights how rising COMEX gold and platinum inventories—potentially signaling speculative market activity, monetary policy reactions, and industrial demand shifts—are influencing inflation in interconnected ways.
Whether through increased manufacturing demand, evolving investor sentiment, or shifts in Federal Reserve policies, these metals play a more significant role in shaping inflation than traditional supply-demand models suggest.
As we continue to monitor these developments, our inflation model remains focused on identifying early inflationary signals. Tracking commodity stock levels, monetary trends, and industrial shifts will be essential in predicting inflation’s trajectory in 2025 and beyond.