The upswing in platinum shows no sign of slowing. Prices reached a new record above $1,800 an ounce this week and have now risen by 55% over the past year; in January they leapt by 14%, the highest monthly gain in eight years.
Of the world’s platinum, 75% is supplied by South Africa, where the power outages that underpinned the latest spike look set to recur; given capacity constraints, electricity rationing seems inevitable. Moreover, ongoing concerns over mine safety, labour disputes and manpower and equipment shortages also make mines susceptible to potential disruptions.
The market’s supply deficit will rise, “further eroding the low level of above-ground inventories”, says Barclays Capital, while continued growth in the auto-catalyst sector, where platinum is used to reduce emissions, should underpin demand.
With the fundamentals looking “better and better”, as John Reade of UBS puts it, it’s no wonder analysts see platinum’s price momentum continuing well into this year and have been rushing to upgrade their forecasts. Barclays Capital sees prices averaging $1,740 an ounce this year. Indeed, platinum is likely to post the “largest price gains across the commodity complex in 2008”, it reckons. Investors can gain exposure to the precious metal with a London-listed ETF (PHPT).