By Desmond McMahon – Exclusive to Platinum Investing News
Platinum prices made gains on Tuesday, climbing to $1,525 per ounce. Platinum’s current low point for 2010 came early in February when prices fell to $1,470. Since then, the metal made considerable gains through February, March and April with prices climbing as high as $1,731 per ounce before falling again in May. Despite those losses, the metal has been trading between $1,500 and $1,600 per once since and is still up 5 percent since the start of the year, an impressive feat given the lingering fears that the European debt crisis could still trigger a double-dip recession.
New York-based commodity consultant CPM Group thinks platinum’s outlook is strong. In its 2010 Platinum Group of Metals Yearbook, CPM Group said the platinum market will see a narrower market surplus in 2010 on the back of strong investment interest during the launch of U.S. platinum-backed exchange traded funds and a recovering auto industry.
“Investors are expected to remain attracted to platinum because of the potential for price appreciation based on the metal’s positive supply and demand fundamentals,” the report said.
CPM’s report echoes statements from Johnson Matthey’s Platinum report released in May, which also suggested platinum’s supply-demand fundamentals would improve as automotive sales and other industries picked up. Johnson Matthey predicted these improved fundamentals, combined with increased investment, could drive platinum prices over $2,000 an ounce before the end of the year.
However, CPM also says higher prices will to lead to South Africa increasing production by 6 percent in 2010, which would leave the platinum market in surplus for another year.
China and India Driving Auto Sales
Platinum demand is largely reliant on growing auto sectors in China and India. The metal is primarily used as an auto catalyst to clean vehicle emissions and these two countries continue to drive worldwide auto sales while markets in North America and Europe recover.
China’s auto sales rose 30 percent in the first half of 2010, moving 7.18 million units, and remains the world’s largest auto market. Auto production jumped in China too, up nearly 45 percent over the same period in 2009.
And even though auto sales dropped 5 percent in June from a year ago, analysts are expecting a rebound in the fourth quarter. The Chinese government decided to extend an auto replacement subsidy program until December 31 this year and it is expected consumers will wait until the last minute to buy a new car before the incentives expire.
In India, sales continued to boom in June, riding on high domestic demand. Tata Motors posted the largest jump in passenger car sales for June, up 63 percent and selling close to 28,000 vehicles. This increase places Tata as the second-largest player in India’s domestic market, surpassing Hyundai Motors who reported a 19 percent increase in domestic sales for June. The country’s largest car-maker Maruti Suzuki posted 18 percent growth in June.
