A week in platinum: Metal hits five year low

London (July 18)  As the Greece noise became more muted this week, precious metals all lost more ground. Investors are gaining more confidence that a ‘Grexit’ is looking less likely.

Gold gets most of the headlines, but its performance has been robust relative to its precious metal neighbours and especially platinum. The white metal has been in decline for some time and lost another US$40 this week.

An hour into trading in the US on Friday, platinum was trading at US$995 compared to gold at US$1,137 and silver at US$14.86.

Marex Spectron said it was “another dire performance for precious metals, especially for platinum, which fell to a low not seen since 2009.”

The metal is now US$140 away from the price of gold, the widest gap it has seen since the end of 2012.

“This is due to a big increase in supply, not only from the mines but also from scrap, coupled with a gloomy outlook for the Chinese and European car market” Marex Spectron said.

Auto-related industries are one of the three major drivers for platinum and other PGM’s such as rhodium and palladium, along with jewellery and industrial demand, as they are used in car exhaust filters.

There should have been some respite for the beleaguered metal as strong car sales figures were published for Europe yesterday.

According to data from the European Automobile Manufacturers Association (ACEA), June saw 14.6% more cars registered year-on-year.

“This was the steepest monthly increase since December 2009 and also attributable to all key sales markets” Commerzbank said.

However, dark clouds have been gathering over China, where the China Association of Automobile Manufacturers revised down its estimate for vehicle sales this year.

Commerzbank said: “The 3% increase in sales that is now anticipated would be the lowest level of growth in at least ten years.”

This hasn’t put-off analysts at ABN Ambro, who see platinum as its preferred precious metal investment.

“We stick to our view that platinum prices have fallen enough and that they should start rising again” it said.

Firstly, a Grexit, which would have been beneficial for gold but not for platinum, is looking less and less likely and the analyst notes that demand for auto catalysts will benefit from certainty in the Eurozone.

“In addition,” it continues, “Chinese authorities will do whatever it takes to avoid a hard landing in China.

“As such, we remain constructive about Chinese jewellery demand for platinum, gold and silver.

Last but not least it said speculators have increasingly taken short platinum positions, while the gold/platinum ratio is at extreme high levels.

“We see this as an opportunity to position for outperformance of platinum versus gold, as we expect this ratio to drop substantially.”

Source: ProactiveInvestors.uk