Worries about the inflationary impact of monetary easing may well appear misplaced. However, no doubt they remain widespread – so widespread in fact that they have underpinned the rise of the gold price over the last couple of years. Recent assessments by the Fed that the near term economic outlook appears to have improved combined with reduced anxiety over the European debt crisis have taken much of the steam out of the gold price and allowed it to drop back below its 200 day moving average. At the same time, a cautious but growing optimism that global GDP growth particularly among manufacturing if not strong then not as bad as previously feared has acted as a support for platinum allowing the more industrially focused catalytic metal to rise in price. It has taken its 200 day moving average back above gold for the first time in six months.
Source: ETFS Securities
Central bank and investment buying remain support factors for gold but the demand from emerging market private investors has become a problem in some markets. Although China has encouraged the general public to become physical gold buyers in India the Associated Chambers of Commerce and Industry of India (ASSOCHAM) has said the government has proposed to raise import duties from 2 to 4% to try to discourage excess imports into the country. India’s annual gold production at approximately two tons, (the country imports around 900 tons), has caused a strain on the country’s balance of payment. As the largest importer of gold in the world, India accounts for nearly one-third of the annual demand. Imports by value have increased from $4.1 billion in 2001-02 to $33.8 billion in 2010-11 due to higher prices and rising demand in the country. Some fear imports could reach $100bn by 2015-16.
Platinum’s rise appears similar to gold this year, haven risen up to late February only to fall back a little since. Relatively speaking though, platinum support appears strong due to its improving industrial fundamentals over gold with weakening financial fundamentals. How the next few weeks will play out nobody knows but the momentum appears to favor platinum.