Platinum price sags to 6-year lows
Johnnasburg-S.A. (Jun 17) Platinum market sentiment continues to worsen – it hit its lowest in six years this week – but the resilience of platinum-based ETFs may offer some upside potential.
The spot price hit its lowest since May 2009 at $1,077 per ounce on Tuesday and remains close to that level at $1,080 – it has fallen 10 percent since the start of the year.
The metal was more than $100 cheaper than gold for a while – the last time this happened was in January 2013, Commerzbank noted.
Despite a long-term deficit that should be supportive for prices, sentiment has been weak. Even during the heights of last year’s five-month strike in South Africa, platinum peaked at just $1,520 – it had started the year at $1,371 and closed it 12 percent lower at $1,206.
Still, the World Platinum Investment Council suggested in its quarterly report that the deficit for 2015 may not be as big as initially expected.
The WPIC revised its predicted deficit for this year to 190,000 ounces, 72 percent below its estimated 2014 shortfall of 670,000 ounces and well below other analysts’ estimates for this year nearer the 700,000-ounce mark.
The weak South African rand is weighing – it hit its worst since 2002 earlier this month at 12.6348 against the dollar – and European car sales offer little reason for cheer.
Still, sizeable above-ground stocks are often cited as the catalyst for platinum’s failure to react to the deficit. CPM Group’s Jeffrey Christian said during LPPM week that there were overall 12 million ounces of refined platinum in above-ground stocks at the end of 2014.
But Commerzbank attributes the weak platinum price “first and foremost to the weak gold price, which is dragging platinum down with it, the weak South African rand, which is increasing supply from the leading producer country, and selling on the part of speculative financial investors”, it said.
But while the metal’s correlation with gold may have added to mounting downside pressure on platinum, ETF holdings have been slowly increasing. Yesterday’s inflow was the highest since March at 15,600 ounces – investors appeared to capitalise on the cheaper price.
As of Monday, platinum ETF holdings of 2.582 million ounces were the highest in three months in the wider context of a downward trend that has been in place since July 2014.
Holdings are up around 7,000 ounces or 0.3 percent for June so far after falling around 0.2 percent in May, 2.7 percent in February and 0.03 percent in January.
“The resilience of platinum ETFs thus far is encouraging, especially in light of current weak market sentiment,” UBS said.
Holdings in the ETF Securities Physical Platinum Shared fund as of June 13 were near a 2015 high at 533,476 ounces, the second largest of any platinum-based fund.
“This suggests that sentiment may be overdone – in spite of the negative bias right now and the acute focus on short-term price action, that platinum ETF outflows remain contained suggest that investors with longer horizons remain fundamentally constructive,” UBS said.
Still, the performance of gold ETFs during the 2013 sell-off serves as a reminder that ETF holdings can become a significant source of supply under certain conditions, it pointed out.