February 20, 2015 / 2:30 PM / 4 years ago

Platinum reaches biggest discount to gold in nearly two years

* Gold’s price premium over platinum tops $50/oz

* Platinum, gold spread at highest in nearly 2 years

* Euro zone crisis underpins gold, undermines platinum

By Jan Harvey

LONDON, Feb 20 (Reuters) - Platinum’s discount to gold hit its highest level on Friday since the gold price crash of April 2013, as concerns over the euro zone outlook lifted demand for the yellow metal as a haven, while dampening sentiment towards platinum.

Prices of the white metal fell to 5-1/2 year lows on Friday, weighed by concerns that turmoil in the currency bloc could hurt demand from the European car sector, which accounts for nearly a fifth of annual platinum consumption.

Gold meanwhile recovered from Wednesday’s six-week low as investors weighed up whether euro zone finance ministers will reach a deal that would prevent a possible Greek exit from the euro zone.

Spot platinum was at $1,160.50 an ounce at 1340 GMT, down 0.2 percent, while spot gold was up 0.4 percent at $1,211.85 an ounce.

Earlier, the spread between the two reached $54 an ounce, its highest since April 2013, when gold’s decade-long rally ended with a $200 an ounce price drop in just two days.

“Gold’s safe-haven credentials are much greater than platinum’s,” Capital Economics analyst Caroline Bain said. “Both gold and silver could benefit if the situation in the euro zone deteriorates, but I don’t see the other precious metals benefiting. Increasingly, it’s the industrial story that is important to them.”

In the near term, the arrival of the Lunar New Year in China and other key Asian markets is likely to have removed some support from prices, analysts said.

“The Chinese jewellery industry builds up its stocks of platinum ahead of Valentine’s Day and Chinese New Year, and jewellery production slows just ahead of this festival,” David Jollie, an analyst at Mitsui Precious Metals, said.

Platinum supply meanwhile has shown signs of growing. The big South African producers say output is slowly ramping up after last year’s unprecedented five-month miners’ strike. Northam Platinum for one reported double-digit supply growth in the second half of last year.

Against this backdrop, investors are losing appetite for the metal. Platinum ETFs, popular investment vehicles which issue securities backed by physical metal, have reported their biggest monthly outflows since early 2010 this month.

The impact of last year’s strike was cushioned by above-ground stocks of the metal, the scale of which remains unclear. That has made investors wary of positioning for longer-term market tightness.

“One difficulty that platinum has faced in the last few years is that market participants who are more short-term oriented have had to trade on a long-term fundamental story,” UBS said in a note. “Platinum needs investors to be more patient as fundamentals take time to play out.” (Reporting by Jan Harvey; Editing by Crispian Balmer)

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