Platinum price rebounds to 1335 in European morning after plunging for 3 consecutive days. Technically, platinum’s outlook has turned more bullish after breaking the resistance of 1300 on September 11. That resistance level has now become support!
Similar to gold and silver, investment demand in platinum has been strong in recently months. According to CFTC, net speculative long positions in platinum futures have risen to a record high of 16521 contracts in the week ended September 15. According to ETF Securities, total platinum held by custodian has reached 355M oz, the highest level in more than a year, as of September 21. We worry that price will correct should investors sell what they have bought. In fact, such risk is higher in platinum than in gold. Investment demand in platinum is mostly by hedge funds and metal speculators who look for short-term profits as platinum does not possess the same safe haven appeal as gold.
However, we believe the improved demand/supply outlook in platinum should lend support to price in the medium- to long- term.
Auto-catalyst contributes 50% of demand for platinum. Therefore, outlook in auto sector is critical for platinum. After the disastrous first quarter, auto production and sales have started to recover in recent months with US’ recovery the most prominent. In Europe, production has also recovered after making a low in 1Q09. However, the risk is that the rebound may not continue as the government’s stimulus program ends. In fact, Europe is the most critical region affecting platinum. In 2008, Europe contributed 38% of world platinum demand and almost 40% of world’s auto production.
Gold price rebounds +1.3% to 1018 as USD resumes the decline. Against the euro, the greenback plunges to 1.48, the highest level since September 21. Against NZD, the dollar slides -1.1% after New Zealand surprisingly recorded current account surplus of NZD 0.12B in 2Q09.
Crude oil price also regains the 70 level amid strength in stock markets. In Asia, the MSCI Asia Pacific Index excluding Japan added +1% as the Asian Development Bank upgraded its economic forecasts in Asia to +3.9% in 2009, compared with a growth of +3.4% projected in March. In 2010, the growth projection is likewise upgraded to 6.4% from 6.0%. China is still expected to record the strongest growth as led by ‘aggressive monetary easing and the massive fiscal stimulus package’ by the Government. The nation’s economy is expected to grow by 8.2% in 2009 and 8.9% in 2010, up from the March forecast of 7% and 8% respectively.
In the UK, the FTSE 100 Index gains -1% to 5183. Germany’s DAX and France’s CAC 40 climb +1.4% and +1% respectively to 5751 and 3850.
Source: Oil N Gold Report