Time for gold lovers to go for platinum

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Even as the investors are busy replenishing their portfolios as and when the gold prices dip, it is time for them to take note of other areas like platinum.

According to a report in Telegraph, the upside in platinum prices over the next few years could be better than gold, and the general consensus is that a buying opportunity is likely to present itself in the next two months.

The report added that the platinum price has fallen by almost 15%  since it hit a 21-month high of $1,745 an ounce at the end of April. The metal now costs about $1,510 an ounce.

However, the price could fall by another $200 over the next couple of months. A fall to $1,442 would confirm that a major reversal lower has been taking place.

Dealers remained nervous about both platinum and palladium as they see more liquidation coming soon. Technical support for platinum is at $1,485 and $1,450.

Platinum demand should improve in the fourth quarter. However, weak metals prices are not guaranteed over the next few months, so investors looking out for a buying opportunity need to keep their eye on the market. There is a distinct possibility these expected price falls may not materialise.

A continually weakening dollar could stop the price slide in its tracks, as a falling US currency provides support for precious metals such as platinum.

The dollar fell to a nine-week low against the euro last week. The market is starting to catch on that US public debt is surging to 100pc of GDP - and the focus of sovereign debt concerns is shifting.

A continuation of market worries about a double-dip recession in the US and its massive debt woes could lead to further falls in the world's reserve currency - and cause analysts to rip up their bearish expectations for precious metals prices over the next few months.

Platinum prices are also more dependent on the European economy than other metals. The European auto sector is dominated by diesel engines, which mainly use platinum rather than palladium in their autocatalysts. Investment demand, particularly in the first half of the year has been strong.

The platinum exchange-traded funds ( ETF ) have absorbed more than 370,000 ounces of the physical metal in 2010. Metals consultancy CPM Group recently noted that ETF holdings of platinum had declined over the last few months, but it argued that the metal would still be attractive for investors because of the supportive supply and demand situation.

The consultancy expects total supply, including recycling, to rise 5.5pc to 7,468,461 ounces this year, as higher prices prompted mines that had been mothballed to be brought back on stream.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

Referenced Stocks: ETF

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