Platinum Gains on Chinese Demand Outlook; Palladium Declines...

Platinum Gains on Chinese Demand Outlook; Palladium Declines
Email | Print | A A A

By Halia Pavliva

Jan. 9 (Bloomberg) -- Platinum rose, capping the fifth straight weekly gain, on speculation that demand from China will rebound from the lowest in a decade. Palladium fell.

Platinum consumption for jewelry in China and Japan, the two largest users, may rise this year, analysts at Johnson Matthey Plc have said. UBS AG analysts in London said the metal’s 57 percent plunge from a record in March through yesterday sparked interest among Chinese buyers.

“At the current price of less than half the peak seen in 2008, and at only a narrow premium to gold, we expect rapid growth in Chinese platinum demand,” John Reade, the London- based head of metals strategy at UBS, said today in a report. “Demand growth in other markets may have to wait for economic recovery.”

Platinum futures for April delivery climbed $10.90, or 1.1 percent, to $1,005.50 an ounce on the New York Mercantile Exchange, the first time the most-active contract closed above $1,000 since Oct. 14.

The price gained 6.2 percent this week and was up 28 percent since Dec. 5. The metal climbed to a record $2,308.80 on March 4.

Platinum jewelry demand in China probably dropped 22 percent to 610,000 ounces in 2008, the lowest in a decade, Johnson Matthey said in November.

“We continue to recommend buying platinum relative to gold,” particularly when platinum’s price is 5 percent higher than gold or less, Read of UBS said. “This trade is not for everyone. Poor liquidity and high volatility in platinum trading mean this is likely to be a volatile trade, so investors will need to be able to tolerate wide swings in the ratio.”

AND

when PLAA is one of the lowest cost producers (whilst higher cost producers close mines), PLAA is still going to be profitable if platinum stabilses around $1000, at which level the attraction for jewellery is likely to be strong