Platinum sinks from $1842 to below $1500 in 6 months

Platinum dropped further as weakness in the industrial sectors that use the precious metal drive down prices.

The white metal declined below$1500 since October, from a peak of $1,842 on June 9. Its parity with gold has been declining sharply since then as gold prices continued to climb further up due to euro zone crisis.

The ratio now sratnds at 0.88, the lowest since 1985. Analysts said one of factors behind platinum’s weakness is the marginal cost of production which usually provides a floor for the price.

When prices fall below the cost of production, this usually forces producers with higher costs to cut or stop output, hence reducing supply.

Continuing concerns about the eurozone crisis and talk of a potential recession in Europe has also depressed platinum, which is used in catalyst converters for diesel cars, popular in the region.

Demand for platinum is driven mainly by industrial sectors rather than jewellery design and the falling price has been attributed to a weakening in these other sectors, particularly in the US and China, and in Japan where the effects of the tsunami are still hitting car manufacturing in the country.

Analysts have also said that there is a surplus of platinum compared to cheaper metal palladium which is a factor that is also keeping the price low.

However, analysts have suggested that this could be short lived and that the ratio could rise again to platinum trading at two times the price of gold as the economy recovers and the Japanese car trade gets back on its feet. – BullionStreet

Tags: platinum, platinum futures, platinum futures prices, platinum price, platinum prices

Posted by admin on Dec 20 2011. Filed under Platinum. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry