Platinum rallies to three-month high on supply concerns
LONDON — Platinum hit a three-month high on Monday as traders fretted about the prospect of further supply outages in South Africa, ahead of a review of the operations of number-one platinum miner Anglo American Platinum (Amplats) there.
Amplats’s parent company, Anglo American, which holds a stake of about 80% in the company, is widely expected to announce shaft closures later this week in the face of soaring costs and falling profits.
Anglo American said on Monday it would announce the results of its review on Tuesday. A source said it would probably sell or shut down its Union mine, which produced 254,200 ounces of platinum in 2011, as part of that.
Expectations that such action will further tighten the platinum market, which was expected to record a deficit of 400,000 ounces for last year, is pushing platinum back towards parity with gold for the first time since April last year.
"It is widely believed that (Amplats) will announce some cutbacks," Société Générale analyst Robin Bhar said. "That’s rallying the platinum price, and it’s closing the differential so that there is less of a gold premium."
"The platinum price will be kept firmly underpinned by any cutback announcements and by possible strike action by the unions. I see it maybe moving towards $1,700/oz."
Spot platinum was up 1.5% at $1,653.50/oz at 2.02pm GMT, having earlier touched its highest since mid-October at $1,660/oz. Its discount to gold dipped as low as $12/oz, from about $140/oz at the start of the year.
Gold prices also rose, helped by the euro’s climb to an 11-month high against the dollar. The single currency was lifted by waning concerns over eurozone debt and declining prospects of further monetary easing.
Spot gold was up 0.5% at $1,671.14/oz, while US gold futures for December delivery were up $10.90/oz at $1,671.50/oz.
The metal traded in the narrow range it has held for the past two weeks, however, as investors remained wary towards gold after it recorded its biggest quarterly drop in more than four years in the last three months of 2012.
"For a sustained rally, you need concerns starting to kick in that would bring new buyers into the market, for instance, a pick-up in inflation," Bank of America-Merrill Lynch analyst Michael Widmer said. "Until then, it’s going to be difficult to have a sustained rally, so I think we’re going to stay within the same range."
Financial markets were awaiting a speech later in the day by US Federal Reserve chairman Ben Bernanke. Attention will focus on any further indications of how long the US central bank’s latest bond-buying programme will last.
In the longer term, gold may derive support in coming months from discussions over the raising of the US debt ceiling.
"We view the recent sell-off as a good entry point to re-establish fresh tactical longs in gold before the run-up to the debt-ceiling debate, which we view as a likely catalyst for higher gold prices," Goldman Sachs said in a note. "After (that), we expect gold prices will decline as better US economic data override further easing."
Data from the Commodity Futures Trading Commission on Friday showed hedge funds and money managers cut the size of net longs in gold futures and options to a four-month low last week as bullion prices fell on concerns the Fed might withdraw stimulus.
Technical analysts at Barclays Capital flagged up support for the metal at $1,640/oz and resistance at $1,680/oz, its highs and lows of the last fortnight.
"Gold needs to sustain the close above the $1,665/oz area to signal a move toward the $1,695/oz area," it said in a note. "Trend indicators, however, warn of further near-term chop over $1,625/oz."
Among other precious metals, silver was up 1.9% at $31.01/oz and spot palladium rose 1% to $704/oz.
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