Platinum Prices in India, Mirroring International Trends, May Rise

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While gold has almost always been the first choice of investment for Indians – followed by real estate and equity/debt instruments – in the recent past, there’s another precious metal that has been trying to push its way up this list.

In India, manufacturers pursued platinum for a long time for its industrial uses until a few years ago, when platinum jewelry came into vogue. The Indian market size is about 20 tons and growing. Of course, platinum can never really expect to ever rub shoulders with gold in India as an investment tool on the dint of sheer investment size, but “white gold” jewelry is picking up in popularity among young consumers and the elite because of its rarity/unique selling point.

today's metal prices - MetalMiner IndXGold prices in the last few weeks slipped in major way, and most metal analysts feCan el that gold and silver prices may not give good returns on investment in 2013. But platinum is a different story, they say.

This is one precious metal from which one can still expect some returns this year. According to an article in the Business Standard, a report by Thomson Reuters GFMS’ Platinum and Palladium Survey 2013 predicted that platinum prices were likely to average US $1,600 in 2013.

Despite the fact that platinum had been trading at a discount to the yellow metal for the last few years, its prices had started rising in the last few months due to supply constraints. While gold was trading between US $1,452 and $1,480 per ounce, platinum was between US $ 1,484 and US $1,515 per ounce in the international market, clearly showing what was in the lead.

In the Mumbai market, platinum was quoted at about US $512 per 10 grams. Indian platinum prices are highly correlated with international prices, occasionally buffeted by the fluctuations in the Indian rupee-US dollar exchange rates.

The two reasons why platinum prices had started climbing, and may do so again this year, according to the survey, are because of the extensive disruption to mine supply from South Africa, coupled with expected labor unrest. South Africa supplies about 70 percent of the world’s total platinum supply.

Another news report, this time in The Economic Times, stated that platinum prices may touch a new high both in the international and Indian markets in the next few days, when Anglo American Platinum (Amplats), the world’s top platinum producer, announces the outcome of talks with the South African government and unions about its restructuring plans that may lead to the cutting of approximately 14,000 jobs and shelve operations of two of its mining shafts in South Africa.

In India, the spot rate of platinum in India on May 8, 2013, was US $56 per gram compared to gold at US $49 per gram. Over the past two weeks, platinum prices have gone up by nearly 3 percent.

The platinum price this year, say analysts here, will be determined by supply-side factors. If a restructuring does take place and the supply of the metal is strangled, there could be reasonably positive investor sentiment to take on a small surplus and drive a hike in prices through the rest of this year.

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Sohrab Darabshaw contributes an Indian perspective to MetalMiner.

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