When most analysts don't expect gold and silver to give good returns this year, there is a precious metal from which one can still expect some returns. Prices of platinum is likely to average at $1,600 (Rs 86,370 today) during 2013, according to the Thomson Reuters GFMS' Platinum and Palladium Survey 2013.
Platinum, traditionally traded at a premium to gold, was trading at a discount to the yellow metal for the last few years. However, few months ago, due to supply issues, its prices started quoting at a premium. Today, in the international market, gold is trading at $1,480 per ounce, while platinum is trading at $1,515 per ounce. In the Mumbai market, platinum is quoting at Rs 27,800 per 10 gram.
According to the survey released yesterday in Johannesburg, after seven consecutive years of gross surpluses, the platinum market switched to a narrow deficit in 2012, due to extensive disruption to mine supply from South Africa.
"There are possibilities of further labour unrest as we move into the wage negotiation period in South Africa, and shaft restructuring plans are under discussion with the government. Should these two factors be realised, we expect South African platinum output to fail to rebound this year," said William Tankard, research director-mining at Thomson Reuters GFMS.
In India, platinum jewellery is popular as it also has industrial use, and the market size is seen around 20-odd tonnes. "Platinum jewellery is popular among young consumers and the elite class as it has a rearity value. Nowadays, investment interest is also seen in platinum," said Umesh shah, vice-president, domestic jewellery division, Shrenuj & Co.
According to the survey, the industrial sector was marginally positive. The stand-out performer, though, was jewellery demand, which grew nine per cent, aided primarily by a price elastic response and higher discretionary incomes in China. Overall, above ground bullion stocks of platinum remained substantial last year, estimated at more than 134.5 tonnes.
"The platinum price this year remains in the balance and will very much be determined by supply side factors again in 2013. Should restructuring take place and supply be kept off the table, we would expect a reasonably positive investor sentiment to take on a small surplus and drive a pick-up in prices through the year, to average almost $1600," said Tankard.
With more than seven months' demand cover, or one year of South African mine production sitting as stock in the terminal markets, there is plenty of metal.
The demand outlook, particularly in Europe, remains fragile and platinum supply therefore needs to be kept reined in for prices to strengthen and adequately compensate continued long-term investment for an industry with unrelenting cost inflation. If the industry's proposed mine closures are vetoed, both negative investor sentiment and the fundamentals could drive a very different outcome.
