Platinum at multi-month highs; gold turns higher
NEW YORK/LONDON (Reuters) - Platinum and palladium prices jumped on Tuesday, hitting their highest levels since mid-2008, with investment demand fueled by the recent launch of exchange traded funds in the United States.
"The essence of platinum's rally is the continued success of the U.S.-based ETFs, which are driving platinum group metals demand," said James Steel, chief commodities analyst at HSBC in New York.
Steel said platinum demand also got a boost from a positive tone at last week's Detroit Auto Show, and some metals investors using a "long platinum, short gold" strategy.
Spot platinum rose to $1,647.50 per ounce, its highest since August 2008, and was at $1,644 an ounce by 3:49 p.m. EST, against $1,612 quoted late on Monday.
Palladium hit a high of $465 an ounce, a level not seen since July 2008. It was last at $465 versus $457.50.
Bullion investors also took heart from the platinum group metals (PGMs) rally. Gold was at $1,138.50 an ounce against $1,132.50 an ounce on Monday. U.S. gold futures for February delivery settled up $9.50 at $1,140 an ounce.
A U.S. subsidiary of London's ETF Securities launched the United States' first platinum and palladium-backed ETFs earlier this month, and uptake has been healthy.
Holdings of ETFS Physical Platinum Trust rose to 119,941 ounces on Friday from 89,948 ounces from Thursday, while ETFS Physical Palladium Trust also climbed to 124,897 ounces from 99,977 ounces during the same period.
Bank of America Merrill Lynch on Tuesday raised its 2010 platinum forecast to $1,750 an ounce from $1,440 an ounce, as new U.S. ETFs spurred investment buying and an improving auto sector boosted demand for the metals used in autocatalysts.
Analysts said appetite for the funds had a disproportionate effect on the platinum and palladium markets, much smaller in volume terms than gold.
In addition, signs that the global economy is steadying and expectations that central banks may start draining funds from the banking system or raising interest rates later in the year also prompted investors to buy the strategic platinum group metals.
Gold turned higher on Tuesday in the face of a stronger dollar. But one analyst said gold could sell off in overbought conditions after sharp gains driven mainly by investment demand.
"When the central banks showed they can withdraw excess liquidity and curb inflation, we will see gold trending closer to its fundamental value, and the crisis rationale for holding gold will be removed," said Michael Crook, investment strategist at Barclays Wealth Americas.
Crook said he expected increased selling in gold ETFs, and pegged the metal's fair value based on fundamentals at between $700 and $800
Holdings of the SPDR Gold Trust, the world's sixth largest holder of gold ahead of China, Japan and Switzerland, have declined nearly 21 tonnes so far this year, compared to a rise of some 15 tonnes in the same period of 2009.
Among other precious metals, silver prices were at $18.73 an ounce versus $18.61 an ounce late on Monday.
(Reporting by Frank Tang and Michael Taylor; Editing by David Gregorio)
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