Platinum ETF could thrust price above $1,450/oz

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Platinum ETF could thrust price above $1,450/oz
Allan Seccombe
Posted: Wed, 25 Apr 2007

[miningmx.com] -- PLATINUM-backed exchange-traded funds (ETFs) could drive the platinum price beyond $1,450/oz further damaging an already battered jewellery market, metals consultancy GFMS said on Wednesday.

The published forecast price in the GFMS Platinum & Palladium Survey 2007 for platinum of $1,450/oz could well be exceeded with the introduction of ETFs, said senior consultant Peter Ryan.

�Add in the potential from this development and our forecast in print of $1,450 being achieved this year could easily prove too conservative,� he said.

easily prove too conservative

ETF Securities on Tuesday launched their platinum ETF, while Switerland�s Zurich Cantonal Bank (ZKB) will launch their product on the Swiss Stock Exchange on 10 May. Initial indications are that the ETFs will absorb some 70,000 oz to 80,000 oz of platinum in the first year of trading.

Both groups are also launching palladium-backed ETFs. ETF Securities estimates offtake of just below 80,000 oz and ZKB 200,000 oz.

UBS Investment Research said after the ZKB announcement on 13 April that each 100,000 ounces of investment in platinum through ETFs will add $40/oz to the price of the already expensive metal and $12/oz for palladium.

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�This is a very significant announcement that may have profound consequences to the platinum and palladium market,� said John Reade from UBS, who reckoned interest in the products could be larger than anticipated.

With prices forecast to break through record highs of $1,400 oz this year, platinum jewellery could take another battering, Ryan said.

Global platinum jewellery fabrication fell eight percent in 2006, extending the period of straight decline to four years. Last year�s fabrication was one million ounces, which is 39% below what it was in 1999.

Global mine platinum production will reach 7.3 million ounces in 2007 from seven million ounces last year, led again by South Africa, which drove the six percent increase in output in 2006. Platinum production in other domains was flat.

�With continuing expansion in South Africa, the essential elements are already in place for a further rise in platinum mine production in 2007,� Bruce Alway, senior GFMS analyst, said in the Platinum & Palladium Survey 2007.

Global output will rise some 300,000 oz this year to 7.3 million oz. Palladium production if forecast to rise two percent from 7.26 million oz.

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