Platinum could climb to $1,350 an ounce in the next six months if investment demand firms and Chinese jewellery buying stays strong, but weak auto usage will still weigh on prices, refiner Johnson Matthey said.
Platinum prices are expected to be less volatile in 2009 than last year, the company said in its hotly anticipated annual report, and are seen between $950-$1,350 an ounce in the next six months. In 2008 prices swung widely between a record $2,290 and a low of $732.50.
Demand for the white metal from the car industry, the main user of platinum, and the glass and chemical sectors is set to decline this year as the economic downturn persists, JM said. However, buying by the investment community and Chinese jewellery sector has been strong so far in 2009, and could help balance a fall in industrial demand.
"There are weak areas of demand, there is no doubt," said David Jollie, publications manager at Johnson Matthey. "Automotive continues to be weak, industrial is weak." "But you also have very strong jewellery demand from China, and pretty strong investment demand as well," he added. "That has offset a lot of the weakness in demand elsewhere."
Platinum is now at $1,106.50 an ounce, well below the highs it hit before the economic downturn battered car demand. A fall in prices has boosted demand for platinum jewellery and depressed the amount of scrap returning to the market. Chinese jewellers in particular have been buying heavily in the first quarter of 2009, JM said.
The company expects net demand for platinum jewellery "to rise strongly" in 2009. Higher Chinese demand will easily outweigh the weakness in the North American and European jewellery markets, it said. Meanwhile, investment demand from exchange-traded funds is likely to rise further this year if prices continue to climb, it added. Buying by ETFs, which issue securities backed by commodities, has boosted precious metal demand in recent years.
"There is clearly a correlation between rising prices and rising ETF investment," said Jollie. "The question is whether it is the price movement driving the ETF holdings, or the ETFs driving the price movement." "ETF buying so far this year has been pretty strong, and as confidence comes back, you will see more investment coming back into the market and increased chatter about ETFs," he added.
A proposal by London's ETF Securities to launch platinum and palladium-backed ETFs in the US could potentially provide further support to prices, if it comes to fruition, he added.
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