Platinum prices could rise 11% this year: report
By Polya Lesova, MarketWatch
Last Update: 8:00 AM ET Apr 25, 2007
marketwatch.com
NEW YORK (MarketWatch) -- Platinum prices will extend their rally this year and could rise as much as 11% to $1,450 an ounce, fueled by positive investor sentiment and strong fundamentals, precious metals consultancy GFMS said Wednesday.
The firm is expecting sister metal palladium to rise as high as $420 an ounce this year vs. the closing price of $379 on Tuesday.
The latest GFMS survey was carried out before the recent announcement regarding two new platinum exchange-traded funds in Europe -- one in London, launched Tuesday, and one in Switzerland, to be launched in early May.
"Add in the potential from this development and our forecast in print of $1,450 being achieved this year could easily prove too conservative," said Peter Ryan, senior consultant at London-based GFMS, in a statement.
The July contract for platinum closed Tuesday down $20.20 at $1,311.50 an ounce on the New York Mercantile Exchange.
Positive investor sentiment should underpin platinum prices given dollar weakness, inflation concerns and global political tensions, GFMS said.
Platinum's fundamentals are also strong, due to limited above-ground stocks and inelastic demand.
"Whether these would be in a position to drive prices higher in isolation, however, was seen as less certain, as the metal was projected to remain in modest surplus due to further growth in mine production and another year of contraction for jewelry," GFMS said.
Total platinum supply rose by 6% to nearly 7.9 million ounces in 2006, mostly because of increased production in South Africa. Mine production in other countries was flat year-on-year.
Fabrication of platinum jewelry fell for the fourth successive year in 2006, with global output declining by 8%. The continued surge in platinum prices poses the biggest threat to the platinum jewelry market, GFMS said.
"Given that we are forecasting platinum prices to break through $1,400 this year, we would not be surprised to see further losses in platinum jewelry," Ryan said.
Demand for platinum, however, rose by 2% and outpaced losses in jewelry.
As for sister metal palladium, GFMS expressed concerns about the strength of its fundamentals, though its outlook remains bullish.
"Heavy Russian stock sales are again expected to tip the metal into a sizeable residual surplus," GFMS said in a statement.
However, the price of palladium might rise to as much as $420 an ounce this year, "due to continued investor support, linked to buoyancy in other precious metals and further substitution opportunities in autocatalysts and the longer term promise for palladium jewelry," GFMS said.
The June contract for platinum closed down $8.40 at $379 an ounce on Tuesday.
Palladium mine supply rose by 5% year-on-year in 2006. The world's largest producer of palladium, Russia's Norilsk Nickel (NILSY :206.00, -3.95, -1.9% ) , increased its output only slightly. South Africa, on the other hand, boosted its palladium output, along with its platinum production. Canada and the U.S. also hiked their production levels.
"For palladium, we are forecasting a recovery in global jewelry demand, although much will depend on whether palladium gains greater acceptance in the US," Ryan said.
Polya Lesova is a MarketWatch reporter based in New York. |
