Platinum prices hurt by poor auto market, but aided by oil's potential rise.

By Leia Michele Toovey- Exclusive to Platinum Investing News

Platinum was up on Monday, reversing some of last weeks huge losses. The metal used in the auto industry continued its rise on Tuesday, but later in the day experienced losses. Platinum’s rise from its 3 1/2 year low came as crude oil prices advanced, encouraging investors to buy commodities including precious metals. A spike in oil may recover platinum, and OPEC is meeting in November to discuss production levels. OPEC favors a cut in output and may pare output in stages to maintain stable prices as global growth weakens.

Platinum for August delivery climbed 6.8 per cent to close at 2,986 yen a gram ($910 an ounce) on the Tokyo Commodity Exchange. It slumped on Oct. 17 to 2,793 yen a gram, the lowest for a most- active contract since Feb. 16, 2005. Metal for immediate delivery jumped $44.50 to $910.50 an ounce at 9:33 a.m. in London, a 5.1 per cent advance from New York prices on Oct. 17.

Spot platinum reversed early gains on Tuesday, falling 2.4 per cent to $871.00 an ounce. Platinum was at US$897.50/oz, up 0.50 per cent from Monday’s close of US$893/oz. Platinum for August delivery dropped 1.6 per cent to close at 2,938 yen a gram ($904 an ounce) on the Tokyo Commodity Exchange. Metal for immediate delivery declined $11.50 to $887 an ounce at 9:50 a.m. in London, a 1.3 per cent drop from New York yesterday.

Although crude is lending support, poor auto sales are denting gains. The metal is down 45 per cent this year as carmakers have reduced production forecasts. Both Toyota Motor Corp, and Ford Motor Company slashed production estimates earlier this year; recently, Nissan and Hyundai Motor Co. joined in trimming vehicle assembly. Nissan will cut production at two domestic factories by 65,000 vehicles between November and March. The carmaker will also stop production for three days at plants in Tennessee and Mississippi, while  Hyundai’s Alabama plant will take a production break for 11 days. U.S. sales for Asia-based carmakers plunged a combined 30 per cent last month as the credit squeeze made it more difficult to finance new vehicle purchases.

According  to Credit Suisse, the platinum industry could be helped if  platinum producers around the world would work together on a plan to cut output by 10 per cent in an effort to stimulate the metal’s price. “We estimate that the industry should reduce their production by more than 10 per cent to stimulate prices and platinum equities,” David Davis, a Johannesburg-based analyst at Credit Suisse Standard Securities said in a research note.

The metal hit a record $2,290 an ounce in March after a power shortage in main producer South Africa disrupted mining and led to supply worries. Platinum has since fallen on worries of weaker global economic growth and lower demand from the auto industry, the biggest consumer of the metal. Global vehicle growth, and hence autocatalyst production is expected to decline sharply year-on-year. Credit Suisse estimates that global vehicle growth is expected to decline by 1.5 per cent and 3.4 per cent in 2008 and 2009.The world’s number one platinum producer, Anglo Platinum does not plan to take this advice to heart. Anglo’s Chief Executive Neville Nicolau expects a platinum price to rebound on fundamentals in the range of $1200 to $1300 an ounce in the year ahead.

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