Platinum Surges on Production Cut Worries

   on January 15 2013 10:24 AM
Platinum Plumbs Deepest Discount To Gold In 7-1/2 Months
Platinum Plumbs Deepest Discount To Gold In 7.5 Months Reuters

Precious metal soared as led by platinum on concerns over production cuts in South African mines. Moreover, gold price gained amid speculations that the Fed would continue its accommodative policies as Fed Chairman Ben Bernanke cautioned that the US economy is not out of woods, signaling the Fed would maintain its accommodative stance, while Japan’s Prime Minster Abe pushed for "bold monetary policy" by the BOJ. The benchmark contract for gold rose to 8-day high of 1683.8. PGMs jumped with platinum gaining as much as +2.93% and palladium rising to an 11-month high of 725.0. Anglo American Platinum announced it will suspend 4 shafts in South Africa, leading to reduction of production by 400K oz per year. The closure would lower production of the company by -19%. Supply of platinum is vulnerable to output loss as the metal output has been affected by power outage and labor strike in mines in the country.

At a speech before the congress, Fed Chairman Ben Bernanke warned that the US economy is not out of woods yet. Meanwhile, he echoed what President Obama said about the fiscal issue of the country, noting "raising the debt ceiling gives the government the ability to pay its existing bills - it doesn't create a new deficit". Concerning QE measures, Bernanke indicated that previous measures have successfully brought "down long-term rates down pretty significantly" and stressed that he did not see "significant inflation" would be a result of Treasury buying.

In Japan, Prime Minister Abe talked about appointment of the new BOJ Governor. He reiterated the importance of aggressive monetary easing and stated that the next Governor should push "bold monetary policy". Japanese yen weakened further after his comments. Gold should be sent higher with one more government pledging to stick to monetary easing.

On the dataflow, headline CPI in the UK stayed at +2.7% y/y in December while core inflation eased to +2.4% from +2.6% in November. In the US, the Empire state manufacturing index probably improved to 0 in January from -8.1 a month ago. Advanced retail sales probably gained +0.2% m/m in December, down from +0.3% in the prior month. Excluding autos, retail sales might have risen +0.2% after a flat reading in November.

Oil and Gold Reports contributed by Oil N' Gold

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