Platinum and palladium prices could rally 20-30 per cent over the next six months as investor buying and stronger demand from the automobile sector outstrips the growth in supply, according to British refiner Johnson Matthey.

The precious metal company said yesterday in an annual report that platinum prices were likely to rise to up to $2,000 per troy ounce. Spot platinum in London yesterday traded at $1,705.50 an ounce.

JM said palladium prices could surge to $700 an ounce, from $522 yesterday.

“[The] positive price outlook stems from industrial recovery and investor interest,” the refiner said ahead of next week’s Platinum Week in London, the annual gathering of traders, consumers and producers.

“The palladium price [will] be supported by better fundamentals and investor sentiment,” it added.

The forecast is a sharp reversal of last year’s low prices when weak industrial and auto demand put the platinum and palladium markets into surplus.

Because the precious metals are used primarily in the production of catalytic converters, demand is linked to the fortunes of the automotive industry.

JM said the launch of new exchange traded funds backed by physical metals had “substantially” bolstered investment demand.

The refiner said physical investment consumption for platinum rose by 18.9 per cent and by 48.8 per cent for palladium last year.

It forecast another large increase this year. “If interest rates remain low and the gold price stays at its current levels, net investment in platinum may well continue to grow and help to sustain the price,” JM said in the report.

Oil prices fell during the week due to fears about demand and the strength of the dollar against the euro, analysts said.

The US oil benchmark West Texas Intermediate suffered the most after inventories at Cushing, Oklahoma, the delivery point of the Nymex WTI contract, hit a record high.

ICE June Brent fell 1.39 per cent over the week to $77.18 a barrel. Nymex June WTI plunged 4.6 per cent to $71.61 a barrel.

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