Precious Metals

Platinum likely to return to a premium to gold later in 2015

Valcambi Suisse reports that the spot price of platinum is likely to return to a premium to gold later in 2015. The following is excerpted from the Feb. 24 edition of Metals Focus, the company's weekly report on precious metals:

At the time of writing, the platinum:gold discount stands at around $40, a little above its recent two-year low. Central to this is increasingly bearish investor sentiment towards platinum, reflected in the drop in both ETF [ExchangeTraded Funds] holdings and net long positions in New York since end-January.

This may appear surprising, given the upturn in European light vehicle (LV) sales and the prospects of another market deficit this year, albeit lower than in 2014. However, investor concern appears fixed on the supply outlook in South Africa, where rand weakness has helped further defer any plan the industry may have for voluntary cuts in platinum output.

Even so, there are still grounds for platinum to re-establish a premium over gold later this year, not least as [gold] should bear the brunt of investor selling when a U.S. interest rate rise first emerges.

Since end-January, investor sentiment towards platinum has turned more bearish. To a large extent, this reflects renewed pressure on gold.

The weak rand has also done platinum no favours. In the space of one week the currency fell by around 5% (against the dollar), to its lowest level since late 2001. This has given South African platinum producers some breathing space, making voluntary production cuts even more unlikely than they already had been, in the medium term.

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