Gold prices have soared by 32pc this year, as investors sought a safe haven from the global debt crisis. However, some argue that gold is in a bubble fuelled more by speculation than the fundamentals of supply and demand. In contrast, platinum prices have risen by just 5pc so far this year – and supply remains very tight indeed.
Last month gold prices charged ahead of platinum prices, creating what some analysts regard as a sign that gold is overvalued.
Nick Moore, a metals analyst at RBS, is clear that platinum currently looks a better investment bet. "Platinum is now very cheap relative to gold," Mr Moore says. "Over the past 10 years platinum has averaged $420/ounce higher than gold."
Spot gold is currently at $1,883 an ounce with platinum futures at $1,876 – a $7 premium. Indeed, last month gold managed to jump to a premium of about $50 an ounce. Standard Chartered also said last week that it thought platinum was likely to outperform gold over the next few weeks after investor demand for platinum picked up "sharply."
The market fundamentals of platinum are tight. According to Platinum 2011, released by Johnson Matthey earlier this year, the platinum market in 2010 showed a "very small" surplus of just 20,000 ounces.
Global supplies of platinum rose by just 35,000 ounces in 2010 to 6.06m ounces, while gross demand for platinum in autocatalysts, the main use of the metal, rose by 43pc to 3.13m ounces. Industrial demand for the metal jumped 48pc to 1.69m ounces.
"Continuing economic growth across the world is driving demand for platinum in industrial uses, particularly glass and chemical catalyst manufacture and in diesel autocatalysts; and for palladium in electronics manufacturing and in emissions control catalysts for gasoline vehicles, especially in China," Johnson Matthey said. "The growth of new consumer-driven technologies and applications such as LED backlit televisions is expected to result in acceleration of demand for the minor platinum group metals."
In the future, platinum could be in increasing demand for fuel cells and in "non-road" emissions control. Emission control from shipping could be a major driver of future demand.
However, latest data from the US regulators has shown that large investors have reduced their long positions in New York traded futures contracts. In the week to August 30, speculative long positions fell 6pc week-on-week, but still outnumbered short contracts by 26,576 contracts on the New York Mercantile Exchange.
Also, growth in vehicle sales in China is expected to slow to between 3pc and 5pc this year, according to Xu Changming, director of China's State Information Center. This follows a 32pc leap in sales during 2010. China overtook the US as the world's largest automobile manufacturer in 2009, after its sales jumped 46pc over the year.
At the end of last week, HSBC analysts in the US upped their price targets for platinum in 2012 and 2013 because of increased vehicle production and industrial demand was expected to increase at a faster rate than mine supply.
The analysts forecast that platinum prices would average $1,875 an ounce in 2012, up from its previous view of $1,750 an ounce. For 2013 it increased its 2013 platinum target to $1,825 an ounce from $1,650.
One thing that could support the price of the metal are rising costs. About 80pc of global reserves are in South Africa, where input and staffing costs are rising significantly. Miners in the country are also being hit by the relative strength of the rand against the dollar.
The case for platinum is clear. The metal is scarce, expensive to mine and is used in far more industrial applications than gold. Significantly, there are no large inventories of the metal held anywhere above ground – unlike gold.
However, the auto market is seeing a slowdown in China and India – and this could keep a cap on gains for now.
The Telegraph
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