Platinum hits record high on good demand, tightness

LONDON - Platinum set a record high on Tuesday as strong industrial demand and market tightness prompted speculators and consumers to heavily buy the metal.

By (Reuters)

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Published: Tue 18 Dec 2007, 5:56 PM

Last updated: Sat 4 Apr 2015, 9:41 PM

Gold advanced towards $800 an ounce, but remained vulnerable to wide fluctuations because of thin markets ahead of Christmas and year-end holidays.

Shortage of platinum in the spot market also lifted short-term borrowing rates of the metal to around 7 percent from about 2.5 to 3.0 percent one month earlier, analysts said.

‘This is investor-driven, but supported by a strong fundamental story,’ said David Holmes, director of metals sales at Dresdner Kleinwort Investment Bank.

‘The tightness in the market, the expectation that there could be supply issues in 2008 and robust demand have been helping the metal,’ he said.

Spot platinum rose as high as $1,505 an ounce and was quoted at $1,505/1,510 an ounce by 1051 GMT, compared with $1,494/1,498 in New York late on Monday.

Supply disruptions following deadly mining accidents in South Africa, the world’s main platinum producer, and growing investor demand for the metal, mainly used in jewellery and to clean car exhaust fumes, have supported prices this year.

Johnson Matthey, the world’s top platinum refiner and fabricator, said in November the market would change course in 2007 and see a deficit of 265,000 ounces. It had a surplus of 65,000 ounces in 2006 after seven successive years of deficits.

‘Long liquidation and short covering also contributed to the bullish momentum. The tightening lease rate suggests there might be more buying to come,’ BNP Paribas said in a daily report.

The market tightness also rose with strong inflows of the metal into exchange-traded funds. Platinum held by London-based ETF Securities has surged to 105,000 ounces from around 35,700 ounces in early November, industry sources said.

Traders said that nervousness about whether Russia, a leading producer, will issue export licences on time for 2008 was also affecting the market.

‘Fundamentals for platinum have been very strong due to robust industrial use and fears over supplies in South Africa,’ said Shuji Sugata, manager Mitsubishi Corp Futures and Securities Ltd in Tokyo.

‘It seems the recent sharp rise in lease rates helped push up the spot price,’ he said.

Benchmark Japanese platinum futures gained 1 percent, which encouraged buying of spot platinum. The October 2008 contract hit a high of 5,210 yen per gram before ending 36 yen higher at 5,190 yen.

Near $800

Spot gold gained in European trade and was quoted at $796.05/796.75 an ounce, up from $794.60/795.30 late in New York on Monday. It hit a 28-year high of $845.40 on Nov. 7.

‘We are remarkably resilient and pivoting around $800. The market keeps on taking advantage of dips as an opportunity to buy,’ said Holmes of Dresdner.

In other bullion markets, US gold futures also gained. The most active February contract was trading up $1.6 an ounce at $800.70 from the New York settlement. The benchmark October 2008 contract in Tokyo ended 4 yen per gram lower at 2,901 yen.

Palladium was up $1 at $355/360 per ounce from New York close on Monday, while silver rose to $13.94/13.99 an ounce from $13.87/13.92.

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