In early April, we looked at platinum’s flailing demand. While also used in jewellery, 60% of its demand comes from the auto industry (it’s used in catalytic converters for cars). And abysmal global car sales have greatly driven down demand for the metal.
But there’s been a ‘rally’ of sorts in platinum prices. Take a look at the chart below. It shows platinum’s spot prices for the past year. It’s currently trading at $1,262 per ounce - up 34% from the start of 2009.
But this has been caused more by a spillover of gold’s ‘safe haven effect’ rather than anything fundamental. Recent speculation on the possibility of a strike at a South African mine causing supply disruptions also pushed prices higher.
Platinum may not hold on to its gains from this year
Source: Kitco
All-round commodities strength may have given platinum a boost, but many analysts say the severe erosion of industrial demand could see it re-testing $950/oz (circled).
The outlook for car catalyst metals such as platinum remains uncertain. Commodity refiners and metals groups have been hastily rebuilding platinum stocks on hopes of a pick-up in demand. But they’re merely taking advantage of lower prices... and the actual surge in new orders has yet to happen.
When we see a real economic recovery, then a rising price for platinum will be entirely justified. But until then, this market is in the hands of speculators and is one to avoid. If you’re looking for a way to protect against inflation, here is a better solution.
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