Global economic conditions keep platinum bearish

By Leia Michele Toovey- Exclusive to Platinum Investing News

The continuing rise of the greenback coupled with the auto industry woes has hit platinum where it hurts the most – market prices.

These two factors are causing platinum to continue its bearish trend. The metal has declined 12 per cent recently, as the US dollar has risen against the euro, instigating investors to pull their money out of the commodities. On Tuesday, for the ninth straight day, the dollar rose against the euro, its longest winning streak since the regional currency’s debut in 1999.

A slowdown of Europe’s economy is responsible for the two currencies’ diversion. A trade report released on Monday showed that trade surplus in Germany shrank in July, a sign that the region’s largest economy was cooling down.

Metal for immediate delivery plunged US$51.50 to US$1,292 an ounce at 9:47 a.m., GMT, a 3.8 per cent decline from New York yesterday. Platinum for October delivery through the New York Mercantile Exchange fell US$61.90 to US$1,291 an ounce. Given the current trend, analysts are predicting that the Exchange futures may drop to as low as US$1,200 an ounce this month. The benchmark Tokyo platinum contract plunged by the daily 300 yen limit on Friday or 6.1 per cent, to 4,612 yen per gram.

South Africa’s rand fell against the dollar as gold and platinum tumbled, damping foreign earnings prospects for the world’s biggest producer of precious metals. South Africa produces almost 80 per cent of the world’s platinum and about 10 per cent of its gold, typically causing the rand to move in tandem with their prices.

More movement in all of the commodities can be expected this week, due to a number of pending economic announcements. At resource investing news, Dave Brown summarizes these pending announcements in his weekend recap. He also revisits some of the key occurrences last week that were of influence to the commodities.

Company news

Anglo Platinum has named a new Chief Financial Officer. Finance Director of the South African state-owned electricity provider Eskom Holdings Ltd Bongani Nqwababa will take up the post at the world’s largest platinum producer and join the company’s board in January. He succeeds Norman Mbazima, who was named the chief executive of parent Anglo American PLC’s steel-products business, mid-May. Prior to his post at Eskom, Nqwababa served as finance director at the South African arm of oil giant Royal Dutch Shell PLC. He is a board member of insurer Old Mutual PLC and chairman of the South African Revenue Service’s audit committee. Duncan Wanblad, Director of Projects and Engineering, and Mbazima had jointly acted as CEO of Anglo Platinum following the resignation of Ralph Havenstein last year.

South Africa’s Mvelaphanda Resources (MVLJ.J) has denied the Sunday Telegraph’s report that it was in talks with Aquarius Platinum (AQP.L) about a possible merger with the world’s No.3 platinum producer Lonmin (LMI.L). Rumour was that Lonmin, which has spurned a 33-pound per share takeover offer from Xstrata (XTA.L), was in talks for a three-way merger with Aquarius and Mvelaphanda. Xstrata said last month it was planning to launch a £5bn all-cash offer for the platinum producer worth £33 a share. However, this was rejected by Lonmin as “too low”.

X-strata has not given up on the prospect of a takeover, Xstrata said it would launch a bid after it had secured bank financing and started the process of clearing the deal with the competition regulator in South Africa, where Lonmin’s mines are located. Lonmin was unhappy with the ‘pending offer’, and in order to speed up the process, they requested a deadline from the takeover panel as to when they could expect the offer to be issued. X-strata responded with an October 2 deadline.

X-strata said yesterday it was happy with the deadline, which was consistent with its earlier statement that “the announcement of a firm intention to make an offer is subject only to the finalization of the necessary bank debt financing. We do not expect any impediments to securing that financing”.

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