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Platinum investment set to grow further
Reuters
Posted: Thu, 16 Apr 2009
[miningmx.com] -- Platinum investment is set to grow further in 2009 as a spate of metal-backed securities issues piques interest in the white metal, with buyers seizing a pricing opportunity to take on platinum as a proxy for gold.
But upward price momentum that has lifted platinum more than 30% since the beginning of the year could falter as the proliferation of investment vehicles is set against ongoing weakness in industrial offtake.
Demand from carmakers -- who buy around half of global platinum supply for use in catalytic converters -- is expected to remain weak, while the strong Chinese jewellery buying seen at the start of the year is likely to peter out.
"The upward momentum we've seen recently has been driven primarily by strong investment demand," said Barclays Capital analyst Suki Cooper.
"(But) we are still very much reliant on industrial
consumption, and that in turn is very dependent on the auto sector," she added.
A spate of "cash-for-clunkers" schemes -- in which governments offer incentives to car owners to scrap old vehicles in favour of newer models -- has helped arrest the slide in car sales in some countries, but is seen as a temporary measure.
"Car sales in Germany in particular have been supported by an incentive scheme to get people to trade in old cars and buy newer, cleaner, greener cars," said Mitsubishi Corp precious metals strategist Tom Kendall.
"But that is just pulling forward sales that aren't going to be repeated further down the line."
Industrial and autocatalyst offtake, at 5.255 million ounces, accounted for some 80 percent of global consumption last year, according to Johnson Matthey, dwarfing investment demand of 145,000 ounces.
Key driver
Nonetheless South African bank Investec says investment demand has been a key driver of
the recent rise in platinum prices.
Buying of platinum-backed exchange-traded funds jumped in the first quarter as the metal's 65 percent tumble from the all-time high it reached in March 2008 attracted fresh buying.
The price of the white metal slid below that of gold for the first time since 1996 in December, traditionally a signal for traders to buy platinum and sell bullion.
"Given the similar characteristics of platinum and palladium to gold, investors can use them as a store of value," said Commerzbank analyst Eugen Weinberg, referring to their traditional status as precious metals.
"They are not and have never been a monetary asset like gold, but they are still hard assets, and given the possible inflation risks in the future, people could be interested in diversifying into (them)."
London-based ETF Securities has said holdings of its platinum-backed fund jumped 87% during the first quarter, while Switzerland's Zurich Cantonal
Bank has said its platinum ETF holdings rose 28%.
The 482,169-ounce holdings of the two ETFs at the end of the first quarter were equivalent of nearly 8% of annual global supply of the metal, according to the latest production figures available from Johnson Matthey.
Interest was so strong that a new platinum ETF has been mooted in the North American market by ETF Securities, which has filed to register such a product with the U.S. Securities and Exchange Commission.
In addition, South Africa's Absa Capital said it is planning to launch an exchange-traded note giving clients exposure to the spot platinum price in the second half of 2009.
And in Russia, the RTS exchange said it is to launch trading in platinum and palladium futures contracts from April 15.
"If the investment community remains attached to platinum group metals -- and I see no reason why it shouldn't be -- and if we get a U.S.-based ETF, there is potential for higher
prices," said Kendall.
"But the push for higher prices will have to come from the investment side, rather than from the underlying industrial and jewellery demand," Kendall added."
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