Weak demand is still pulling down platinum prices

By Leia Michele Toovey- Exclusive to Platinum Investing News

It was a quiet day on the markets as everyone’s attention was on Capitol Hill where Henry Paulson and Ben Bernanke sounded off on the proposed US$700 billion bailout. Perhaps the relief was welcome after last week’s frenzy of market activity.

Platinum started the week on a good note; prices rose more than 3 per cent as the greenback weakened and a renewed optimism on platinum’s future market returned among analysts.

Although attention today was focused on the bailout package, platinum still took a slight hit. Platinum for immediate delivery dropped US$48.60, or 3.9 per cent, to US$1,207.40 an ounce, joining gold in the precious metals downswing. Despite last weeks market flops, gold was a relatively high performer as purchases increased as a ‘safe haven’ for investors. Platinum futures for December fell US$9 or 1 per cent to US$900 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange. Palladium, a metal that generally mirrors platinum’s activity, in London retreated US$2.25 or 0.9 per cent to US$255.25 an ounce for immediate delivery. Spot platinum was at US$1,178.50/1,198.50 an ounce at 0737 GMT against US$1,134.50 an ounce at New York’s Friday close. Earlier it touched a session high of US$1,181.50.

Platinum, although a precious metal, tends to behave more in unison with industrial metals. This is because the primary use of platinum is in the auto sector. Like the other industrial metals, demand is correlated to the health of the economy. Listed platinum stocks were sold down again on Tuesday, in line with declining dollar prices for platinum group metals, and ongoing broker downgrades. The dollar platinum price is now nearly 50 per cent off its high, seen in early March, compared to gold bullion, down 14 per cent, and silver, down 38 per cent.

As the auto sector has taken a big hit in 2008, so have platinum market prices The selling of platinum stocks contrasts with firm recent buying of listed gold and silver stocks, underpinned by generally rising gold and silver bullion prices riding higher on a dollar that has been softening since September 11.

The nickel market has also been suffering this year. Nickel investing news posts current commentaries on all the mergers and acquisitions currently ongoing to keep companies afloat. By visiting this website and reading through the commentaries it is very apparent how active companies have been in developing new business strategies. Platinum companies are currently witnessing the same trend. On August 6, Xstrata, said it would offer £33 a share in cash for Lonmin, making the purchase target worth US$10 billion.

On September 12, Impala said it was in talks with Mvela Resources and Northam, with a view to a possible tripartite merger. Mvela Resources holds 66 per cent of Northam. If Impala were to acquire Mvelaphanda Resources and Northam, the combined group would hold 535m ounces of platinum group metals in the ground, second only to the 725m held by Anglo Platinum. Northam is a crucial target as in is the only platinum group metals miner with smelters, outside of the Big Three Anglo Platinum, Impala and Lonmin. Cumulatively, the big three producers account for nearly 80 per cent of global PGM production.

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