Platinum Riding High

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"In just 30 years, the auto industry has grown to account for 47% of demand."

Platinum prices hovered around US$1,530/oz. again Monday. Stuck between US$1,500 and US$1,600 since mid-May, analysts are predicting demand for platinum could be heating up and prices could be on the rise.

Analysts with both Schroders and CPM Group, two well-respected asset-management companies, see positive signs emerging for platinum prices. They expect demand to rise in line with development of emerging markets and their infrastructure investment, which could be substantial. Backing up their assessment, the world's largest platinum producer Impala Platinum announced a 2% increase for platinum output for the 12 months ending June 30, 2010, claiming the platinum market fell into deficit in 2009 and it expects that trend to continue with a challenging supply environment and growing demand.

Analysts attribute growing demand for platinum, as well as palladium, in part to tougher pollution-emission standards that are increasing demand for catalytic converters, which use one of the two metals to filter car exhaust. The auto industry has grown to account for 47% of all platinum used in just 30 years. Also used widely in jewelry, electronics as well as glass and chemical industries, platinum prices are driven primarily by supply/demand fundamentals because of its industrial nature.

The Mercenary Geologist Mickey Fulp was optimistic about platinum's future in an exclusive two-part interview on Kitco Radio. Fulp believes in ratios and with gold at an all-time high he thinks platinum could be in for a corresponding increase. He said the gold:platinum ratio is still low compared to where it has been historically and, if gold maintains its current historic high, platinum prices could jump, too. Platinum occurs in unusual and specific geographic conditions and there are also known deposits in Russia, the U.S. and Canada. But South Africa is the world's largest producer of platinum, accounting for approximately 80% of worldwide production.

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