Net physical demand for platinum investment products more than doubled in 2008, rising by 250% from 170,000 ounces in 2007 to 425,000 ounces. The really significant swing came in Japan; in 2007 Japanese investors resold 60,000 ounces of large platinum bars and investors remained net sellers in the early part of 2008, but there followed a palpable change in sentiment as yen prices fell sharply and equity market values were unravelling. The final quarter was especially strong, leading to overall net purchases for the year of 275,000 ounces of platinum. European investment was down from 195,000 ounces to 105,000 ounces, while North American investment activity is reported to have increased by 33% from 30,000 ounces to 40,000 ounces as North American investors cleared the US Mint of its stocks of Platinum Eagles despite volatile prices. Chinese demand for investment products is recorded as zero (the preference being for jewellery products while investment products are gold).The study reports that ETF investment in London was closely correlated with the swings in the platinum price with investors buying substantial quantities of platinum as the price rose, while the subsequent retreat in the price prompted heavy sales from investors keen to release cash. Investment flows in Switzerland were, by contrast, significantly less volatile. Combined positions peaked at 485,000 ounces during July but after sales of 185,000 ounces over the rest of the year there were just 300,000 ounces in the funds at year-end, a net gain of 105,000 ounces over 2008 as a whole. Since then there has been a net addition of 143,000 ounces and here, too, investment had been running in line with prices, although it may be more accurate to say that in parts of the first quarter of this year at least, investment was the strongest price driver and had a significant hand in generating the recovery in the platinum price as investors returned to the market on oversold considerations.The 6% contraction in jewellery demand was driven by the Japanese market. Japanese jewellery demand is recorded for 2007 at 540,000 ounces gross, but 180,000 ounces net as a result of 360,000 ounces of recycling. In 2008, recycling jumped to 480,000 ounces and although gross purchases are recorded at just 5,000 ounces fewer than in 2007 at 535,000 ounces the impact on net demand was clearly substantial, taking it down by 125,000 ounces to just 55,000 ounces. Japan was the only region that reported increased scrap return. Much of this was concentrated in the first part of the year, and towards year-end those retailers who reduced prices saw a sharp rebound in demand with consumer purchases recovering towards 2007 levels.Chinese scrap fell from 290,000 to 210,000 ounces over the year, so that Chinese net purchases for jewellery increased by 100,000 ounces in 2008 to 850,000 ounces or 62% of global net jewellery demand. High prices in the first half of the year saw manufacturers and retailers reduce their stocks and in the first half of the year, gross purchases were below 2007 levels while scrap return was high. The second half of the year saw the position reverse with secondary flows diminishing sharply and manufactures increased their purchases from August onwards.Overall gross European demand remained constant at 200,000 ounces in each year, but high and volatile prices in the first half of the year impinged on jewellery sales and UK demand declined, while Switzerland became the largest European market with production of platinum watches in that country increasing by almost 14%.In the face of high prices and the state of the North American economy, North American platinum jewellery demand contracted by 11% to 200,000 ounces last year, although scrap return was minimal. The first half of the year saw manufacturers' and retailers‘ purchases constrained by high platinum prices combined with tight credit limits and as these low inventory levels were run off it was not uncommon for these prices to be replaced with white gold, which further depressed platinum demand. The fall in the platinum price reduced pressure on the market, but it did not feed through into retail prices before the end of the year and North American consumer purchasing remained weak.Overall, therefore, net jewellery and investment activity absorbed 1.63 million ounces of platinum in 2007; in 2008 the two sectors accounted for 1.73 million ounces. The pattern of price movements against demand, with resurgent interest developing in the second half-year, demonstrates just how rapidly a price-responsive market can adjust to changing circumstances. JM expects a strong recovery in jewellery demand this year and argues that investors will respond positively to rising prices, underpinning the suggestion that $1,350 could be attained.