Platinum hit its lowest level since May 2009 on Tuesday settling at $1,080.80 an ounce. With market sentiment being bearish, some analysts consider the downtrend is soon to bottom up and prices will begin rising.
Simona Gambarini, commodity economist at Capital Economics, said that she is not expecting platinum to fall lower in the near-term but thinks that the market looks a little oversold. The price of platinum has dropped more than 8% since mid-May. Only silver has performed worse than platinum, dropping more than 10%.
“Given the current low level of speculative positioning and the fact that prices have already fallen sharply, we believe that the upside potential for prices far exceeds the downside risk. Overall, we remain positive on the outlook for prices of all four of the main precious metals but expect the more “industrial” precious metals to outperform this year,” she said.
Commerzbank's commodity analysts said in a note that there were two reasons
behind the recent drop in platinum prices.
1) Weaker gold
prices, which are dragging down the entire precious metals complex.
2) A softer rand, which is positive for South African producers, which is the world’s biggest source of platinum.
There are some investors who are taking advantage of
these lower prices, despite the generally negative market sentiment, analysts add.
Weaker global equity markets were another reason for decline in platinum.
A fresh wave of risk aversion sentiment that is sweeping markets has hurt the white metal.
However, Commerzbank analysts stick to a positive view on platinum in the long-term noting that its industrial uses, especially in diesel engines, primarily used throughout Europe, is still strong.
“As the market is expected to remain in a supply and demand deficit this year, we are fundamentally positive on the PGMs.”
