Almost unnoticed by the markets the platinum price has been quietly recovering from a very brief fall to a level just below the gold price, to re-assert its position and premium over gold - at least for the moment!
Arguably, platinum was perhaps the most oversold metal commodity of all in the huge market downturn which took place in the second half of the year just past. It's not that the outlook is actually much better than it was a few weeks ago, but the reality is that much of the world's platinum production has been becoming uneconomic at current price levels and many mines need higher pgm prices to survive the current economic downturn.
But overall, the short term pricing outlook isn't seen as great and there is still the strong possibility that the metal may not be able to maintain its recent upwards path. Top precious metals analyst Jeffrey Christian of CPM Group in New York is one who reckons that platinum prices could decline from the rise we have seen during the past few sessions. He feels that prices could slip back to the $820 - $840 level.
In a note to Mineweb, Christian says that the increase in price has been mostly in response to the U.S. government's approval of GMAC (the financing arm of General Motors) as a bank holding company. This gives GMAC access to $6 billion of the $700 billion TARP (Troubled Assets Relief Program) fund, making it easier for GMAC to make loans, which is expected to result in increased auto sales in the U.S.It could be some time, most likely the second half of this year, before auto sales actually pick up, however reckons Christian. A high level of job insecurity at this time is likely to trump increased access to a loan. Buyers are likely to wait for the economic environment to improve before taking on additional loans. This could prevent buyers from acquiring new cars, or at least delay their decision to do so, until the economic environment improves. The lack of demand for autos at this time is likely to push down the prices of platinum in the near future.
Christian notes that demand is the strongest influence on the platinum market at this time and will likely be the biggest concern for the market throughout the this year. The demand for platinum is largely dependent on auto catalysts; therefore auto sales will be one of the most important factors to watch for. Purchasing platinum ETFs on price declines could be a good medium to long term investment says Christian.
Even so, platinum was trading at around $1,000 an ounce this morning and still seems to be moving upwards, along with other precious metals. But given that in reality platinum is a commodity dependent very much on the auto industry, it is the health of the latter which will likely define the price in the short to medium term.