Metals Focus: Platinum Won’t Keep Gaining Against Gold

Platinum’s discount against gold has fallen to the lowest level since May but may not narrow much further since supply/demand fundamentals are still working against platinum, say analysts with Metals Focus. At one point this week, the discount was below $370 an ounce. Sub-$800 platinum prices in late summer encouraged bargain hunting, Metals Focus says. The metal also benefitted as traders favored so-called risk assets generally, pushing the S&P 500 to record highs and also boosting industrial base metals. “By contrast, the lack of risk aversion has weighed on gold,” Metals Focus says. “This in turn partly explains the recent narrowing of the discount between the two metals. That said, while platinum prices should rise over the short to medium term, we do not expect this gap to fall significantly further.” This is mostly due to platinum’s “largely unsupportive fundamentals,” Metals Focus says. Production is holding up, with meaningful supply cuts not expected for a few more years, thus Metals Focus sees 2018 global mine supply easing by only 2% to 6 million ounces. “A similar decline of 2% is predicted for global platinum demand,” Metals Focus says. “Here, the two largest areas are automotive and jewelry, with respective shares of 41% and 28% of fabrication demand in 2018. Both are facing downward pressure.” For autos, the issue is lost market share for diesel-powered vehicles, which require platinum for auto catalysts.

By Allen Sykora of Kitco News;

Commerzbank: Gold Market To Take Cue From Post-Meeting Fed Comments
Wednesday September 26, 2018 08:35

So will Federal Reserve members remain hawkish, or might they start to signal a reduced rate of monetary tightening? That, say analysts with Commerzbank, will be the key question for gold traders when a two-day meeting of the U.S. Federal Open Market Committee ends Wednesday. Markets expect another 25-basis-point rate hike. “The Fed fund futures have priced in two rate hikes this year, including today’s increase, and two next year,” Commerzbank says. “Some Fed representatives had recently signaled that a somewhat stronger approach might be taken from 2019. That said, the still stable underlying inflation pressure, the fact that the impetus from the tax reform will abate next year and the uncertain consequences of the trade conflict with China do justify a certain caution. It is thus perfectly possible that [Fed Chair Jerome] Powell will put the brakes on rate-hike expectations, which would lend [a] tailwind to gold. This would see gold follow the usual pattern of rising immediately after a rate hike.”

By Allen Sykora

For Kitco News


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