Platinum Overtaking Gold as Metal of Choice on Autos

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"Automakers, the biggest buyers, will expand output 20% this year."

Even after a record 57% rally last year, platinum is cheap relative to gold, signaling more gains as demand grows from carmakers and exchange-traded funds.

An ounce of platinum buys 1.41 ounces of gold, down 42% from the record 2.43 ounces in 2001 and 23% less than the 10-year average, data compiled by Bloomberg show. Automakers, the biggest buyers, will expand output 20% this year, said Evan Smith, who helps manage $2 billion at U.S. Global Investors. Hedge funds raised their bets 163% in 2009, about twice gold's increase. ETF Securities Ltd. funds lifted holdings to a record 598,104 ounces.

"We are long platinum and short gold," said Jonathan Barratt, the Sydney-based managing director with Commodity Broking Services Pty, who predicted platinum's rally in September. "Gold remains under pressure. As inflation moves lower and the dollar goes higher, gold isn't as solid."

Bank of America-Merrill Lynch strategist Michael Widmer raised his forecast for this year by 35% to an average of $1,750 and predicted $2,000 for 2011. Standard Chartered Plc forecast platinum will be one of the year's best commodities. Prices may jump 55% to a record $2,400 by mid-year, said Joerg Ceh, head of commodity trading at Landesbank Baden-Wuerttemberg in Stuttgart, Germany's biggest state-owned lender.

Platinum, which declined 0.2% to $1,546 an ounce at 7 p.m. in London, is still down 33% from its March 2008 record, while gold sold for $1,096.54, within 11% of its peak last month. Buying platinum today and selling gold would return 30%, should the ratio return to the 10-year average of 1.84 times.

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