Platinum soars on supply jitters

London (July 3)   Platinum reached an almost 10-month high on Tuesday on signs that increased demand from car companies will add to a supply shortage. Gold held below its highest level in three months.

Investor holdings in platinum-and palladium-backed funds are at, or near, records as demand from vehicle makers and a South African mining strike that lasted five months lead to a third successive supply deficit. US vehicle sales adjusting for seasonal trends accelerated to an annualised pace of 16.98-million last month, the fastest in almost eight years, said researcher Autodata on Tuesday.

About 220,000 members of the National Union of Metalworkers of SA stopped work on Tuesday to support their request for pay increases. The protests come after a platinum strike that lasted from January to June.

The country is the largest producer of the metal, which is mainly used alongside palladium in car pollution-control devices.

"Investors acknowledge the difficulties that the South African platinum sector faces beyond the resolution," UBS analysts wrote in a report on Wednesday. "Participants will be keeping an eye out for any signs of tightness in the months ahead."

Platinum for immediate delivery rose 0.5% to $1,516.63 an ounce by 11.28am in London on Tuesday, according to Bloomberg generic pricing. It reached $1,519.38, the highest level since September 4. The metal for October delivery increased 0.3% to $1,518.90 on the New York Mercantile Exchange. Futures trading volume was almost double the average for the past 100 days for that time of day, according to data compiled by Bloomberg. Palladium added 0.4% to $857.13 an ounce in London. It is up for an eighth straight day, in the longest run of gains since February.

Holdings in platinum-backed exchange-traded products reached a record 88 tonnes on June 20 and were little changed from that level as of Tuesday, data compiled by Bloomberg show. Palladium holdings are at a record high. Gold exchange-traded product assets rose 13.2 tonnes in the past two days, the biggest two-day tonnage increase since 2012.

The dollar was little changed near a seven-week low against a basket of 10 major currencies before Federal Reserve Chair Janet Yellen spoke on Wednesday and after a gauge of US manufacturing on Wednesday rose less than analysts projected.

Gold has risen 10% this year, rebounding from the biggest annual slump in three decades, as the Fed said it would keep interest rates at almost zero for a considerable period of time and as unrest in Iraq and Ukraine spurred haven demand.

"With continued dollar weakness and various ongoing problems around the world, the precious metals seem to be attracting some fresh attention," said David Govett, the head of precious metals at Marex Spectron in London, wrote on Wednesday in a report. "We are seeing investors getting in near the highs. I would expect to see some profit-taking over the next day or two."

Gold for immediate delivery was little changed at $1,327.55 an ounce in London. It reached $1,332.33 on Tuesday, the highest since March 24. Bullion’s 14-day relative-strength index was at 70.7, above the level of 70 that suggests to some traders who study technical charts that prices may retreat. Silver for immediate delivery increased 0.2% to $21.0725 an ounce in London.