Is Now The Time To Buy Platinum?
San Francisco (Jun 16) Although platinum prices are trading at a six-year low and the platinum:gold ratio is at its lowest point in two years, some precious metals analysts think a bottom is close at hand and prices could soon turn upward.
Comex October platinum futures settled Tuesday at $1,080.80 an ounce, its lowest point since May 2009.
platinumAnalysts at Commerzbank said in a research note Tuesday morning said there were two reasons behind the recent drop in platinum prices. The first is because of weaker gold prices, which is dragging down the entire precious metals complex. The second reason they said is a weaker rand, which is positive for South African producers, which is the world’s biggest source of the white metal.
Although market sentiment is conclusively negative, the analysts at Commerzbank added that there are some investors who are taking advantage of these lower prices.
“The low price [Monday] clearly attracted the bargain hunters, however, as platinum ETFs saw their highest daily inflow since March – at 15,600 ounces,” they said in a note.
Commodity analysts at HSBC attributed the recent decline in platinum to weaker global equity markets. They said the white metal has gotten tangled in the new wave of risk aversion sentiment that is sweeping markets. However, they remain positive on platinum in the long-term as its industrial uses, especially its use in diesel engines, primarily used throughout Europe, remains strong.
“As the market is expected to remain in a supply and demand deficit this year, we are fundamentally positive on the PGMs,” they said in a research note published Monday evening.
In a research note released Monday morning, commodity analysts at UBS said that they see risk of short covering in the platinum market as speculative gross short positions hit at an all-time high.
According to the Commodity Future Trading Commission disaggregated Commitment of Traders report, money managed speculative platinum contracts had a net length of 10,395 contracts.
“Although [Platinum Group Metals] currently look vulnerable near the lows, overly stretched short positioning is one of the few positives that market participants should keep an eye on,” they said in their note. “We maintain the view that negative sentiment towards platinum is overdone and has room to moderate.”
Simona Gambarini, commodity economist at Capital Economics, said in a note Tuesday that she wouldn’t rule out platinum dropping lower in the near-term but agreed that the market looks a little oversold. She noted that price have dropped more than 8% since mid-May. Only silver has performed worse than platinum, dropping more than 10%.
“Given the current low level of speculative positioning and the fact that prices have already fallen sharply, we believe that the upside potential for prices far exceeds the downside risk. Overall, we remain positive on the outlook for prices of all four of the main precious metals but expect the more “industrial” precious metals to outperform this year,” she said.