Nov 21, 2007
Platinum prices may outrun gold again next year
Strong demand and output disruptions worsen the metal's worldwide shortage
MUMBAI - PLATINUM may be a better investment than gold for the second year running in 2008, as rising demand and supply disruptions aggravate a global shortage.
'There's fundamental demand that's driven by consumers and investors, and there's a large deficit in this metal,' said Mr Raymond Key, global head of metals trading at Deutsche Bank in London, in an interview in Mumbai yesterday.
Platinum output will fall short of demand by 265,000 ounces this year, the biggest gap since 2003, because of falling South African production, speciality chemicals company Johnson Matthey said last week.
The metal, used in vehicle exhaust filters and jewellery, has soared 28 per cent this year, outpacing gold's 23 per cent gain. Platinum for immediate delivery rose US$12, or 0.8 per cent, to US$1,462.25 an ounce at 1.51 pm Mumbai time yesterday (4.19pm in Singapore).
Prices may rise to US$1,530 by year-end, and climb as high as US$1,850 an ounce next year, Mr Key said. The metal, whose largest producer is South Africa, may average US$1,700 next year.
Gold approached the US$850 an ounce peak on Nov 7, and is headed for its seventh year of gains, because of the metal's appeal as an alternative asset to the US dollar. Some companies, including JPMorgan Chase, expect prices to top US$1,000 next year as the US currency continues to weaken.
'Unlike gold that moves largely on the weakness of the dollar, platinum is being driven by fundamentals,' Mr Tom Kendall, precious-metals strategist at Mitsubishi in London, said yesterday.
'There's a large deficit on the one hand and strong demand on the other. Prices are certain to reach a new high next year.'
The platinum deficit may reach as high as 350,000 ounces this year, he said. The shortage may ease next year after Anglo Platinum, the biggest producer, resumes operations at one of the mines it closed this month, he said.
The company last Friday reduced its output forecast for this year by as much as 7.5 per cent, after taking measures to improve mine safety following a spate of fatal accidents.
BLOOMBERG NEWS
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