Platinum Gives Up Gains

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Precious Metals

It surprised me to read  how little platinum is actually in circulation, even though one in five goods manufactured either contains or is produced using the metal. According to the article, all the platinum ever mined would fit in a room measuring 25ft square (I notice they didn’t say how high it was though!). Nevertheless, when you think the total world production of platinum is less than 180 tons, it gets a remarkable amount of press.

We last reported on platinum just 6 weeks ago in early June at which time the power supply disruptions in South Africa were providing firm support to prices and many were talking of $2500 per oz as a possible target. Since then all PGM’s (Platinum Group Metals) have slipped back with platinum 20% down and palladium 30% down from the record highs seen earlier this year according to the Standard Bank July report . It would seem the reality of a slowing global economy has finally hit home with metals prices as nearly all metals have been influenced by an expectation of slowing demand. In the case of platinum a reverse in the trend of petrol to diesel engines due to the premium cost of diesel in European markets has added pressure to an already slowing western market and reports of an overstock position in new car production in China. 60% of mined platinum goes into car catalytic converters. From an expected deficit this year the market is beginning to think platinum will achieve a small surplus and this has added pressure to mining stocks which have taken an even bigger hammering than the metal price. Miners have been faced with rapidly rising costs as prices have come off and demand looks like it may ease. Fortis Bank is still calling platinum at over $2000/oz on the back of power disruptions and strikes in South Africa source of 80% of the world’s platinum. Unlike gold, platinum is not a currency  and is largely driven by supply and demand ” or perceptions thereof ” with the general perception that auto sales are down and the emerging markets are beginning to feel the effects of a global slow down the probability is platinum and the other PGM’s have had their run for this year. $ 2000/oz is optimistic and the previous highs of $2300 look highly unlikely.

–Stuart Burns

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