Platinum prices hit a 25½ year high in London on Thursday, leading some traders to predict it would break above the key psychological level of $1,000 a troy ounce by the end of the year.
Platinum breached key resistance levels around $952.50 during European trading to hit $955 a troy ounce, the highest since March 1980. Later in the session, the price retreated to $951, a gain of $14 or 1.5 per cent on the day.
Prices have risen by 24 per cent since the latest stage of platinum’s bull run started in May of last year. Platinum prices have been rising since October 2001, increasing by 129 per cent from a low of $415.
However, platinum has only closed above the $1,000 level once over the past thirty years in a brief two-day spike in March 1980 when prices peaked at $1,048.2 a troy ounce.
Speculative activity by US funds is a key driver in the market. Dealers said yesterday’s price action was largely driven by fund buying and some covering of short positions. Physical buying was limited with prices close to record levels.
Traders said short-term price consolidation would not be surprising but the stage appeared set for further price gains due to a combination of massive speculative interest and strong fundmentals.
Platinum attracts the most speculative interest of all commodity classes. In the futures market, speculative net long positions rose to 73 per cent of open interest in October - the highest on record for any commodity.
However, fundamentals also remain supportive with strong demand growth in the automobile sector, where platinum is used in catalytic convertors to clean car exhaust fumes.
Johnson Matthey’s Platinum Review 2005 reported platinum buying for use in autocatalysts jumped by 240,000 ounces to 3.51m ounces in 2004 with growing demand in Europe powered by higher sales of diesel cars and tighter emissions limits.
“Platinum has the most constructive fundamentals among the precious metals,” said Yingxi Yu, an analyst at Barclays Capital.
Barclays Capital’s forecasts suggest global demand will rise this year by 3.6 per cent to 7.54m ounces while supply will increase by 4 per cent to 7.49m ounces.
The global market has been in deficit since 2001 and the market has recently been pricing in a more bullish outlook for platinum amid news of supply disruptions and expectations that high petrol prices will spur interest in diesel vehicles.
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