Platinum Surges, but Remains Discounted to Gold

12-Sep (USAGOLD) – Platinum, like the rest of the precious metals, has performed impressively in recent weeks. The early-summer low at $1374.50 (29-Jun) survived multiple tests in July and August, leaving last year’s low at $1339.20 (29-Dec-11) well protected and setting the stage for the current rebound.

From the August low at $1376.90 (03-Aug) to today’s high at $1655.00, platinum is up 20%. The price acceleration away from the 20/50/100/200-day moving average complex, along with the 20-day MA crossover of the others, and the seemingly impending 50-day cross of the 100-day MA combine to set a pretty favorable technical tone. While the market is overextended on a short-term basis, corrective retreats would offer buying opportunities.

Fundamentally, the market appears strong as well. About 60% of platinum demand comes from the automobile industry and global car sales rose 6% in H1-12. While the ongoing sovereign debt crisis in Europe and continued sluggish economic growth in the United States and elsewhere are perceived to be headwinds for the auto industry (and by extension platinum), robust demand for cars in emerging markets such as Russia, China and Brazil are seen as an offsetting factor.

The ongoing recovery process in the wake of last year’s earthquake and tsunami also contributed to a 52% y/y rise in Japanese auto demand. Make no mistake, U.S. auto demand has been solid this year as well, reaching a 5-year high amid pent-up demand, easier credit and cash-flush corporations updating aging fleets. However, doubts about sustainability persist. It remains to be seen if über-accommodative monetary policy on the part of the world’s major central banks can foster a true and broader global recovery. The fact that platinum continues to trade at a discount to gold is reflective of these doubts.

Renewed labor unrest in South Africa — the world’s largest producer of platinum — offers additional support to the market. Fresh protests today shut down some South African operations of Anglo American Platinum, heightening concerns about constrained supply.

Platinum now shows potential for a retest of the double-top from February at $1733.00/$1733.50. However, I’m disinclined at this point — despite my call for new all-time highs in gold — to consider the all-time high in platinum from March 2008 at $2154.50 to be in play. Given the still substantial debt overhang in the developed world, I fear we are in for many more years of sluggish growth, regardless of extraordinary central bank efforts at monetary stimulus.

10-Sep (USAGOLD) — Gold is mildly corrective, consolidating last week’s solid gains in advance of this week’s FOMC meeting and a ruling on the ESM by Germany’s Constitutional Court. The market euphoria associated with the ECB’s announcement that it planned to do unlimited bond buys has been tempered by a new court challenge that could forestall both the aforementioned court ruling and the bond purchases.

Additionally, Greece’s coalition government failed to reach an agreement on additional spending cuts, which likely means that the troika is not going to approve release of the next tranche of bailout funds. Democratic Left leader Fotis Kouvelis said, “Greeks can’t take anymore.” And yet, more cuts — more austerity — is exactly what is being demanded by Greece’s creditors. Negotiations are apparently ongoing.

According to a Der Spiegel article, German Chancellor Merkel “now wants to stop Athens from leaving the euro zone at all costs — even if it means massaging the figures in the upcoming troika report.” This is a purely political shift on her part as a Greek exit from the EMU in advance of next year’s national elections could prove devastating to her. Merkel has been buying time by saying she’s waiting for the troika report on Greece. That may now be delayed until November; and while everyone in Europe has been generally successful in kicking the can down the road time and time again, delaying a decision on Greece into next year may prove problematic.

Bottom line here: Just because the ECB declared it is prepared to buy periphery bonds in unlimited quantities, the European debt crisis remains a long-way from resolution.