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Thomson Reuters GFMS Platinum Outlook for Next Three Months:

Date of Release: 4th May 2012

IMPORTANT NOTE: The following is for informational purposes only and was developed by Thomson Reuters GFMS. It does not take into account the investment objectives, financial situation or particular needs of any particular person. Information is from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Opinions and estimates are the judgment of Thomson Reuters GFMS and are subject to change without notice. Distribution of this information does not constitute agreement with, or an endorsement of, the views expressed. Obviously, future outcomes are impossible to predict with certainty. Investors should obtain advice based on their own individual circumstances and understand the risks before making any investment decisions.

Platinum spent much of april on a downtrend, driven once more by macroeconomic concerns, namely in europe. after a brief jump at the beginning of the month, from an opening of $1,641 to $1,659 by the 3rd (which transpired to be the period’s high), it slumped below $1,600 for the first time since January this year to hit $1,592 on the 5th. This was due to gold’s drop, which came after the release of the minutes from the us federal reserve’s latest meeting. These further reduced expectations of new stimulus, which lifted the dollar and dampened precious metals.

Thereafter, platinum spent the rest of the month tracking lower. Despite some supply side support from a strike at Modigwa, the benefit was marginal; the stoppage (which resulted in the loss of around 21,000 ounces) ended on the 11th april, after which platinum remained below $1,600. The main downside pressure came from europe, as risk-off sentiment surged on the 16th in reaction to news that spanish bond yields had jumped above 6%, triggering fresh fears that another bailout was in the pipeline. Poor news from the european auto sector (new car sales in the region were revealed to have fallen to a 14 year low in March) compounded the negative sentiment. a meeting by the fOMc on the 25th april, in contrast, contained no surprises and thus proved relatively uneventful for gold and platinum, with the latter recovering to the $1,570 level by month-end, helped up by gold.

With regard to the forecast, platinum is expected to continue to face downwards pressure over May. risk off sentiment remains high as eurozone worries remain at the forefront of investors’ minds, which bodes particularly ill for platinum, given that some 50% of its total demand is used in that region’s auto market. Thereafter, however, we expect platinum to recover weakly, despite the murky european outlook. readers may note that we have reduced the expected level of platinum’s gross surplus this year, on the back of a more negative outlook for south african platinum supply. This is not, however, the driver of the expected recovery in prices over June and July, as the scale of the gross surplus remains cumbersome. rather, platinum’s price action will be dictated by gold’s anticipated uptrend, which may start to emerge in June. although the yellow metal has been lacklustre lately, we remain broadly bullish for its prospects given that its price supportive factors, namely low or negative real interest rates and inflationary fears, are still firmly in play. further support to platinum is likely to come from supply side economics, whilst jewellery demand (mainly china) should also provide a helping hand. in addition, net long speculative positions for platinum have fallen to their lowest level since august 2010, leaving scope for positions to rebuild. That said, upside, is expected to be limited to around $1,640, whilst we could shortly see lows of $1,475.

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