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.

US producer prices increased more than expected in May, posting their largest annual gain in three and a half years as energy costs climbed due to the conflict in the Middle East.

The Labor Department's Bureau of Labor Statistics said on Thursday that the Producer Price Index for final demand rose 1.1% in May, matching a downwardly revised increase of 1.1% in April.

Economists polled by Reuters had expected the index to rise just 0.7%, following a previously reported 1.4% jump in April.

On an annual basis, producer prices increased 6.5% in the twelve months through May, marking the largest gain since November 2022.

Most of the increase was driven by higher goods prices, particularly energy products. Goods prices rose 2.8% and accounted for roughly 80% of the overall increase in the index, while services prices advanced 0.3%.

The US-Israeli war against Iran has driven up energy product prices, including gasoline and diesel. Global supply chains have also come under pressure due to restrictions on shipping through the Strait of Hormuz, leading to shortages across a broad range of products, including fertilizers, aluminum, and consumer goods.

On Wednesday, the US government reported that consumer inflation climbed above 4% in May for the first time in three years.

The Federal Reserve monitors the Personal Consumption Expenditures (PCE) Price Index as its preferred gauge for achieving its 2% inflation target.

The acceleration in inflation, combined with a resilient labor market, has led financial markets to increase pricing for the possibility of a Federal Reserve rate hike. However, many economists still believe the likelihood of additional monetary tightening remains limited, arguing that the oil-price shock is still largely confined to the transportation sector.

The US central bank is widely expected to keep its benchmark interest rate within the 3.50%-3.75% range at next week's meeting, although policymakers are expected to abandon their previous bias toward future rate cuts.

Following the release of consumer inflation data, economists estimated that the PCE Price Index rose 0.4% in May, matching the increase recorded in April.

The annual PCE inflation rate is also expected to accelerate to 4.0% in May, the fastest pace since May 2023, compared with 3.8% in April.

The European Central Bank announced its interest rate decision on Thursday at the conclusion of its June 10-11 policy meeting, raising rates by 25 basis points to 2.40%.

The move marks the first interest rate increase in the eurozone since July 2023 and was broadly in line with market expectations.

Bitcoin has entered a fresh downward move below the $62,500 zone, with negative technical signals suggesting the price could face further losses if it falls beneath the $61,200 level.

Rate hike concerns

Although the US Consumer Price Index rose 4.2% in the 12 months through May, marking the highest annual inflation rate since April 2023, economists still see limited prospects for further monetary tightening.

Core inflation, which excludes food and energy prices, increased 0.2% during the month after rising 0.4% in April, boosting hopes that inflationary pressures stemming from the energy price shock can be contained.

James Knightley, chief international economist at ING, said labor costs remain the biggest burden on US businesses, and with wage growth continuing to slow, this could help ease pressure on core inflation.

"All of this should help keep inflation expectations under control. Therefore, while we no longer expect the Fed to cut interest rates this year due to stronger economic momentum, we also do not expect a rate hike," he said.

Markets are currently pricing in a full 25-basis-point rate increase in December, a significant shift from earlier expectations that had pointed to two rate cuts this year before the outbreak of the Iran conflict at the end of February.

Bitcoin retreats toward support levels

Bitcoin failed to hold above the $63,500 support area, remaining within a bearish trading range and extending its losses below the $63,200 level before also breaking beneath $62,500.

The cryptocurrency fell below $61,200 and reached a low of $60,746, while technical indicators continue to reflect persistent selling pressure.

Bitcoin posted a limited rebound above the 23.6% Fibonacci retracement level of the decline from the $64,613 high to the $60,746 low.

The cryptocurrency is currently trading below the $62,500 level and beneath the 100-hour simple moving average. A bearish trend line has also formed, with resistance emerging near $62,400 on the hourly BTC/USD chart.