Platinum falls below $1 000 an ounce

PLATINUM fell below the $1 000 (R12 351) an ounce mark on Friday, leaving prices in triple figure territory for the first time since February 2009, as investors continued to lose faith in its fundamental demand outlook.

Weakness across the precious metals in the face of a rising dollar – set for its biggest weekly gain in two months – is also weighing on prices, with gold hitting eightmonth lows and palladium at its lowest since late 2012.

Spot platinum fell to a low of $998.50 an ounce, down 0.7 percent,on Friday.

Output from local platinum producers has been rising this year after crippling strike action last year. Top player Anglo American Platinum reported a 60 percent rise in refined equivalent production in the second quarter.

Chinese jewellery consumption had been soft this year, while indications of a slowdown in the global car industry, which uses the precious metal in catalytic converters, was also undermining sentiment towards platinum, analysts said.

“A major problem is that investors have lost faith in the long-term story and the reason is probably the diesel issue,” Macquarie associate director Matthew Turner said. “Although European car sales are rising, the diesel share is falling.”

Overall demand

Data suggest overall demand in number one consumer China has also been soft this year.

Mitsubishi analyst Jonathan Butler said platinum turnover on the Shanghai gold exchange was down 21 percent in the first half of the year.

“With jewellery buying suffering as a result of the equity market crash and economic slowdown, there is possibly more speculative activity than normal, helped by a rotation out of equities and into hard assets,” he said in an interview with the Reuters Global Gold Forum this week.

“Overall, we are somewhat negative on jewellery fabrication demand this year, and cautious on industrial buying.”

Platinum has not been below $1 000 since early 2009, after the collapse of Lehman Brothers and start of the global financial crisis sparked broad-based selling of hard assets and panic over the outlook for industrial metals demand.

This year it has been undermined by the fact that last year’s unprecedented five-month strike among platinum producers in South Africa – the source of threequarters of global platinum supply – failed to lift prices, suggesting consumers were plentifully supplied.

Discount

Platinum’s historically unusual discount to gold has reached its highest since late 2012, at almost $145 an ounce.

That has led investors to step back from the market. Gross short positions in NYMEX platinum positions sat at 93 percent of the record high last week, UBS said in a note, while platinum-backed exchange-traded funds had seen outflows this week.

Platinum exchange-traded funds, which issue securities backed by physical metal, saw huge inflows in 2013 and 2014 after the launch of a rand-denominated product in South Africa. While those funds have not been heavily sold, inflows have tailed off this year. – Reuters