By Desmond McMahon– Exclusive to Platinum Investing News

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Tuesday was a tough day for metals on the markets and it was no different for platinum. Prices for June delivery on the Comex division of the New York Mercantile Exchange dropped $93.30 to $1,597.20 despite a report published by Johnson Matthey predicting a positive outlook for platinum prices in 2010.

Germany caught analysts off guard and spooked the markets when it introduced a temporary 10-month ban on naked short-selling of government debt and 10 key German financial institutions late Tuesday. Germany encouraged the rest of the EU to follow its lead to prevent speculation from driving stock prices down and protect the strength of the Euro.

German banks are amongst the most exposed to debt in comparison to their counterparts in Greece, Italy, Portugal and Spain, and the move has increased speculation that the situation in Europe is worse than officials are acknowledging.  Some analyst fear the US$1 trillion dollar aid package is insufficient to cover the high levels of debt and deep government cuts may still be required, which would drag down Europe’s economy and have implications around the world.

In addition to the uncertainty in Europe, changes in the auto industry may have a mid-term effect on platinum prices. Automakers usage of platinum in auto catalytic converters dropped 39 percent in 2009 and they are increasingly switching to palladium-based catalytic converters on gas-engine vehicles. Catalytic converters remain platinum based on diesel-engine models, but their sales are down, and projected to remain down for some time. So, even with auto sales increasing in the US, auto-industry demand for platinum has not returned to 2008 levels.

But, despite concerns these two issues will continue to apply downward pressure on platinum prices,  precious metal firm Johnson Matthey still anticipates stronger supply-demand fundamentals for platinum in 2010 and forecasts demand will balance supply by the end of the year as the world economy continues to recover.

Matthey also outlines investment activity is a major factor in the platinum market. Net long speculative futures positions at high levels and total ETF holdings are becoming even more substantial since the launch of the US ETF early in 2010. Matthey suggests if interest rates remain low and gold’s price stays at its current elevated levels, net investment in platinum may well continue to grow and help to sustain prices.

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