platinum

Don and Jon Vialoux, Financial Post Friday, Jan. 7, 2011

Platinum has a period of seasonal strength in the first five months of the year, according to Thackrays 2011 Investors Guide. The pieces are falling into place for a repeat of the trend this year as the global auto recovery takes off.

The trade has been profitable in 20 of the past 24 periods. The average gain per period was 9.2%. A major reason for strength over this timeframe is increasing demand for platinum used in automotive catalytic converters during the key spring auto buying season. Catalytic converters consume about 37% of the worlds platinum production. Secondary reasons include improving demand for platinum used in jewelry and speculative buying in anticipation of higher precious metal prices.

Demand for platinum in 2011 is expected to increase significantly, thanks mainly to continuing recovery in auto production and sales. Automobile sales increased more than 11% in 2010 and analysts are expecting stronger growth in the year ahead. The cyclical recovery in global auto sales is expected to maintain momentum into the spring 2011 buying season. Improving access to credit and recovering economic fundamentals should enable new car sales to reach a record high. Emerging markets in China, India and Brazil will lead the way. Adding to demand is tighter regulations in the U.S. over carbon dioxide emitted by larger internal combustion machines, which will place further emphasis on catalytic converters in large vehicles such as farm equipment.

The introduction of physically backed Exchange Traded Funds (ETFs) also has increased demand. London-based ETF Securities launched the first physically backed platinum ETF last spring (PPLT). It launched a second physically backed white precious metals ETF (WITE) at the end of November that holds a basket of precious metals weighted 55% silver, 33% platinum and 12% palladium.

Platinums intermediate technical profile turned positive near the end of November. Intermediate trend remains up. Resistance is indicated at US$1,806 per ounce with support falling on US$1,631. Short-term momentum indicators including stochastics, relative strength index and moving average convergence divergence are recovering from oversold levels. Strength relative to the S&P 500 Index and gold turned positive in December

A direct way to invest in platinum for the current period of seasonal strength is through ownership of available physically backed ETFs. Platinum equities also are available.
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