Gold-Platinum gap narrows on demand prospects

Some players in Gold have left Gold to return to the stock market. The DJIA this week closed above 13,000 for the first time since May 2008.

Industrial metals, including Copper and Aluminum, turned higher this year on improving economic prospects.

The worries that the EuroZone debt crisis would drag down the Global economy has lessened. The European Central Bank undertook a long-term refinancing operation that provided liquidity to banks and helped stabilize the financial system in the short term, anyway, they said.

Gold's premium to Platinum is expected to narrow because of better and stronger new car sales.

Growing Chinese demand enabled the Country to overtake the US as the World's largest auto market in recent years. And now, US car sales are picking up again. Manufacturers reported February sales on Thursday and Autodata said these amounted to a seasonally adjusted annualized rate of 15.1-M units, the strongest pace in 4 yrs.

The tightening of Global emissions standards means heavier loadings of Platinum group metals for auto catalysts. Also, investor demand for PGM-related products has picked up this year.

Several analysts also cited supply constraints as a factor underpinning PGMs. In their Q-4 earnings reports, Platinum-mining companies reported lower output than expected due to a series of government-mandated safety work stoppages in South Africa. Then in recent weeks, a strike took place at Impala Platinum's Rustenburg mine, costing the Company output estimated at 100,000 oz's so far.

A rising marginal cost of production for Platinum also helped put a floor under prices. Traders are aware that if any market falls below such levels on a sustained basis for any commodity, producers eventually will cut unprofitable output, thereby reducing supply and underpinning prices again. Stay tuned...

Paul A. Ebeling, Jnr. Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.