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From the GoldMoney Dealing Desk --
Platinum and
palladium prices have continued to fall on concerns about the economic
effects of the Japanese earthquake. Continuing uncertainty about the
Fukushima nuclear reactor is also contributing to bearish sentiment on stocks
and commodities across the globe. The platinum price has fallen by more than
$100 since last week to $1,688 per ounce, while palladium's decline has been
even more dramatic – falling by around 12 per cent to under $700 per
ounce.
The more
pronounced decline in the palladium price is owing to that metal's purity of
industrial utility. Although platinum too is predominantly an industrial
metal, its established use in the jewellery market
– plus its status as "the rich man's gold" – means that
it isn't quite as vulnerable as palladium to the vicissitudes of the market.
Palladium is not as established a store of value as are gold, silver and
platinum.
The
platinum-gold ratio, the number of ounces of gold needed to buy one ounce of
platinum, currently stands at 1.2. The 20-year average for this ratio is
1.55, indicating that currently, gold is
outperforming platinum as a store of value. In mid-2008, however, the ratio
stood at just under 2.4, with the boom in commodity markets early that year
giving a greater proportionate lift to the platinum price than to the gold
price. But by December 2008 the ratio had collapsed to 1.0 as a result of the
financial crisis and stock market crash in autumn. When investors run for the
hills, platinum and palladium prices will suffer.
Toyota,
Honda and Nissan have all temporarily stopped production at their Japanese
plants. Given that platinum and palladium are key elements in catalytic
converters, any slowdown in automobile production will result in lower
platinum and palladium prices. In addition, rising crude oil prices could
also curtail global manufacturing, which would also hit demand for platinum
and palladium. Investors and savers should be aware that further temporary
price declines in both metals are highly likely.
Goldmoney.com
All data and quotes sourced from Reuters.
Published by GoldMoney
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