Platinum Closing the Gap on Gold


"Platinum appears to be rapidly overhauling gold as its fundamentals improve as industry picks up coupled with African mine troubles and it looks set to re-establish its price premium in the very near future."

One little-remarked effect on the huge sell-offs seen in gold and silver prices, the platinum price - which unusually fell back below gold to the tune of nearly $200 an ounce at one time - has been closing the gap on gold quite substantially. At the time of writing the gap is a mere $16, suggesting that, barring a very quick recovery in the gold price, platinum could be trading at a premium to the yellow metal again very shortly.

Indeed platinum's fundamentals are looking pretty good at the moment. With U.S. auto sales rising again, and Chinese auto demand remaining huge, alongside the latter country's efforts to improve the environment, autocatalyst usage looks set fair again. Jewellery demand in China and Japan in particular, but also in India, appears to be on the rise too.

Meanwhile on the production side matters are rather less uncertain. World No. 2 platinum miner, Impala, has been having a torrid time with its workforce at its flagship Rustenburg mine, and although it now says operations will resume March 5, there is the suspicion that disruption may continue beyond then, particularly with regard to violence between strikers and non strikers - which could be exacerbated by tribal group differences.

There is also the chance that the difficulties which have beset Impala could yet spring over to neighbouring Anglo Platinum's own Rustenburg operations and to other producers too.

Anglo Platinum, the world's No. 1 producer, has been having difficulties of its own with a deteriorating safety record leading to safety-related shutdowns, and there is the looming spectre of more South African power outages ahead which could affect production right across the industry.

Furthermore indigenisation issues in global No. 3 producer, Zimbabwe, has been affecting production growth there - and this is an ongoing issue with a current major contretemps in process between the Zimbabwe Government and Impala (giving retiring CEO David Brown another headache to deal with!)

So overall with returning industrial growth, particularly in the important auto sector (which could also give a strong boost to sister metal palladium), and seemingly rising jewellery demand, coupled with supply uncertainties, platinum looks well set to re-establish its price premium over gold in the near future. -Lawrence Williams, Mineweb

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