Platinum Gains Premium Over Gold

Brian Hicks

Updated January 16, 2013

Yesterday, platinum prices moved higher than gold—a first in nearly a year. The metal also hit a three-month high.

Questions have emerged, however, as to how sustainable the situation is.

One major factor, certainly, was the news that leading platinum producer Anglo American Platinum (PINK: AGPPY) would cease production at four South African mines. The company produces nearly 40 percent of the world’s platinum, and this decision will mean some 14,000 people will be laid off and global platinum production will drop about 20 percent or 400,000 troy ounces, as Fox Business reports.

Further, the possibility of central banks reducing or withdrawing their sustained stimulus programs and the ongoing debt-ceiling discussions in D.C. mean gold, while riding high right now, could come under pressure soon enough.

After news of the Anglo American closures broke, platinum rose 3.1 percent to $1,702.50/troy ounce. Spot gold, meanwhile, was $1,682.05/oz.

The reduction of supply is expected to cause the greatest sustained rise in platinum’s costs.

From Fox Business:

“This year, supply risks are likely to have relatively more bearing on platinum prices. (Last year) the platinum market started the year with a sizeable surplus, and it took time to chip away that overhang,” said UBS precious metals analyst Joni Teves.

“The difference in 2013 is that we are starting off with a chunky deficit and mine closures would easily aggravate that shortfall. We therefore expect platinum prices to be relatively more reactive to supply side risks this year,” she added.

But with the upcoming rehash of national financial debates, gold will undoubtedly shoot back up again, which could bring gold back over platinum once more.

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