Business | Markets
Platinum surges to new high of $2,160
Platinum set a lifetime high for the 14th straight day on Tuesday on strong speculative buying on the back of severe output problems in top producer South Africa.
- Reuters
- Published: 00:53 February 20, 2008
London: Platinum set a lifetime high for the 14th straight day on Tuesday on strong speculative buying on the back of severe output problems in top producer South Africa.
Other precious metals also advanced, with palladium hitting a 6-1/2-year high, gold rising nearly 2.5 per cent to trade near a record peak and silver gaining more than two per cent.
Spot platinum hit a high of $2,160 an ounce and was quoted at $2,142/$2,152 at 1324 GMT, against $2,105/$2,115 late in London on Monday. It has gained 41 per cent this year on worries about a widening market deficit.
"Funds and speculative buying is continuing to grip the market. There is a general feeling out there that don't be short, be long," said Rory McVeigh, trader at Commerzbank.
"The problem is that when they stop and people do start taking profit, the downside could be very scary."
Jewellery demand was badly hit because of high prices, dealers said, adding individual investors, specially in Asia, had been selling platinum for strong returns.
South African crisis
Mines across South Africa, which accounts for 80 per cent of global platinum supply, have been hit by a lack of energy after state utility Eskom asked the mining sector to cut power use to 90 per cent of normal needs to ease shortages.
Analysts say the global platinum deficit could widen to 500,000 to 600,000 ounces by the end of 2008, compared with about 265,000 ounces in 2007.
The market had a surplus of 65,000 ounces in 2006, following seven successive years of deficits.
"The platinum market is set to record another heavy deficit this year given the severe power shortages in South Africa while above-ground inventories have been depleted to historically low levels, adding further upside pressure to prices," Barclays Capital said in a report.
Barclays saw the market deficit rising to more than 600,000 ounces by the end of the current year.
The world's No. 1 producer Anglo Platinum has said power problems would cut output by 120,000 ounces in 2008, while Impala Platinum, the world's No. 2 producer, forecast "very tight market conditions."
More than 60 per cent of the world's platinum output is used as catalyst in vehicles, helping to clean exhaust fumes, while nearly 25 per cent goes to jewellery making.
"With the supply situation so tight in South Africa and with the platinum ETF continuing to grow, it is conceivable that platinum continues to make gains," John Reade, head of metals strategy at UBS Investment Bank, said in a client note.
"We recommend taking some profits in any platinum length but retaining the bulk of any long positions."
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